You don’t need to be Irish to be lucky when it comes to applying for a home loan. There are several things lenders like to see when assessing an application and it could improve your chances of getting a competitive home loan.
Take a look at what is lucky:
Strong repayment historyChanges to the credit reporting system will come into effect on March 12, 2014, which means in the future lenders will be able to see the past 24 months of your repayment history. Lenders want to see that you are a reliable borrower and can manage meeting repayments.
If you are able to prove that you always meet repayments and even make extra repayments, lenders may consider you a good risk, which means they could be offered a larger loan amount or a more competitive rate.
Paperwork is readyOne issue that can slow down the loan application process is chasing up missing paperwork. Lenders require a certain amount of documentation from you in order to verify your information. Requirements may vary from lender to lender, but some of the paperwork may include tax returns, bank statements, credit card statements, payment summaries and payslips.
Before you send in your application, make sure you check with your lender about what paperwork they need. By giving your lender all of the information in one go, it may be able to help speed up the process and get your application approved sooner.
Personal debt is minimalWhen assessing your application, a lender needs to see that you have enough surplus income to meet the mortgage repayments. If you have several financial commitments that you can barely afford, your chances of getting a home loan are slim.
Try to keep your expenses to a minimal in the time leading up to applying for a home loan. Ongoing expenses such as gym memberships, phone contracts, pay TV and especially credit cards, car loans and personal loans all affect your borrowing power, so the less you have the better. Not only will minimal debt improve your chances of getting a competitive loan, it may also help you save for a larger deposit.
Have an in depth budget and savings planBeing in a good financial position is extremely advantageous when applying for a home loan. Many lenders require evidence of a savings plan over a certain period of time (usually 5% of the purchase price over 3 months). Showing that you can manage your expenses as well as save money is a big tick for lenders.
Good employment historyRepaying your home loan is reliant on your source of income, so lenders need to be sure that you are in a secure employment situation. Most lenders require that you have been at the same job for at least 6 months and are not on a probationary period. If you have had the same job for several years, this is a big tick for lenders. However, if you decide to change jobs or move to a different industry right before you apply for home loan, lenders may be wary to give you an approval.
Full disclosureBeing open and honest about your financial situation will work to your advantage. Lenders need to be aware of all expenses, income, assets as well as any defaults. Trying to hide information will only hurt your application. If a lender uncovers information that you did not disclose, it could put you in a bad position.
Deposit savedHaving already saved the deposit will mean you are ready to start the application process. If you don’t have a sufficient amount of money saved, you may have to put off purchasing a property. Chat to lenders early to ensure that your savings goals are accurate. Remember, the larger your deposit, the less you will have to pay on other expenses (such as Lenders Mortgage Insurance) and potentially you will be offered cheaper interest rates as well.