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Tips for Improving Your Chances of Finding a Home Loan

The thought of buying a new house without enough funds will make you think of the only possible option – “Home Loan” or “Mortgage Loan”.

However, before reaching a bank, a home loan broker or other lender for a home loan, you should know a few things.


Affordable Amount

Before going for a home loan, you should think “how much amount can I afford to repay?”, which means you need to decide about the amount of money you want to borrow, and how much of it will you be able to repay without disturbing your finances.

Also, you have to calculate your debt to income ratio, which will help you know if it is wise to buy a house of a certain cost.


Wait for Lower Interest Rates

The best way to get a home loan at a low interest rate is to wait until the interest rates are low across the board.

Fluctuation in the rate of interest is common. You can wait for the interest rates to get lower, and then grab the opportunity.


Boost Your Credit Score

Pay your loan EMIs and other payments on time before applying for a home loan, because every delay will affect your credit score. Credit score is one of the deciding factors for your home loan.

It may happen that sometime later, you run short of money to pay towards monthly loan repayments. In those situations you can go for short term loans like personal loans or payday loans to avoid a fine and additional interests that could be levied on a delayed payment. This would also help you preserve your credit score.


Increase Your Savings for Down Payment

Try to save more for the down payment – if you have large amount towards down payment, then it can lead to reduced rate of interest.

When you put more money as down payment, there is lower risk for the lender and you may be rewarded with a lower interest rate.


Think According to Your Budget

If you go for a much bigger apartment or house than your budget, then it will lead you to taking a big loan with less money or disqualification of your loan request altogether.


Check Around

The interest rate for individuals can be different from lender to lender. If you have been a customer of a bank from a long period of time, then you may get lower rate of interest.

Shop around for different lenders and brokers who can give you a good idea of the market.


Be Pre-Approved or Pre-Qualified for Home Loan

When you are pre-qualified, it means that the lender will provide you an estimate of how much you can afford and according to that, you can search for a house.

With a pre-approval, lender has done your credit check and other underwriting work and got it approved for a particular loan amount.

Being pre-approved or pre-qualified benefits you in many ways – like saving time, concentrating on the right house and gaining confidence that you would have adequate funding to buy your dream home.


The article has been written by Michelle, who is a tech writer from UK and is into Finance.  You can catch her @financeport

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