There are several people who are unaware of the fact that home loans are different from car loans and rented apartments. And thus due to some misconceptions, they had to face the disapproval of the home loan application. So, it becomes crucial to learn the tips to get a home mortgage loan approved to avoid disappointments and heartaches.
1. Know your credit score –
Getting your credit score calculated is not at all a time-consuming process. Still, some people never review their score and submit a loan application for home. They assume that their score is high enough and they can easily qualify.
It is said that for a mortgage loan approval, the minimum credit score required is 680. If it falls below 680, then there are chances that the lender may deny your request for the loan. To get a good credit score, it becomes crucial to fix errors on your credit report and clean the credit history priorly.
2. Save the biggest deposit –
People with large deposits are usually imposed less interest rate by the mortgage providers. This clearly means that all the top deals are limited to borrowers who can put between 35% and 40% of the property’s value. While those who can put down only 10% had to pay a higher rate of interest.
3. Pay all the debts –
Your debts will contribute a lot in determining whether you are eligible for a home loan or not. Lenders always calculate your debt to income ratio before approving the application. So clear your debts as much as possible and close all the accounts that are no more in use. Even if your application is approved, it becomes very important to avoid new debts throughout the mortgage process.
You should avoid making major purchases till the closing of the mortgage loan.
4. Know your budget –
Don’t just let lenders decide how much you can spend on a mortgage loan. They make calculations by considering your income and credit report, so don’t rely on them entirely. It is your duty to consider day-to-day expenses while setting a budget. Be smart at making such calculations and decisions. Buy a home that fits completely within your budget.
5. Be prepared with relevant documents –
No lender will consider you as a customer until you can assure your identity. So make sure you have documents like an updated passport and driving license to prove who you are and where you live. For employed workers, they need to have their payslips and bank statements for the last three months. It required the accounts department of your company should be able to provide duplicates.
6. Collect proof of self-employed earnings
Here, it becomes a bit difficult to convince the lender. In the case of self-employed workers, more proofs are required to make the lender assured with your earnings. So, you need an SA302 form relating to the last two years HMRC form if you are self-employed.