Thursday, August 7, 2014
After spending hours on end searching online property sites, putting together a shortlist of homes, and finally getting around to taking a look at your top three or so contenders, you know you’re ready to buy a home.
You’re sold on the idea, in love with the house, and have most likely visualized living in it already. So, where do you go from here? Before you reach for the keys to your future home, you have to figure out how to pay for it.
In last couple of years, television ads telling us how easy it is to get a housing loan have been aired often enough to have us somewhat preconditioned into believing them. The reality is, while there may be more banks offering reasonable housing loan rates, getting approved for one is still a challenge.
What can you do to smooth the way for your loan application? Begin by getting an understanding of it from the bank’s point of view. Any lending institution you approach for your loan will assess you in the same way. Are you a good risk? Will you be able to meet the payments on your loan and its accompanying interest?
Examining your application from the lender’s perspective will put you in the right frame of mind as a borrower. The next move will be to show that you are indeed, a good bet for loan approval. Think of it as preparing your arguments - backed up with paperwork as proof.
So what would make you a good loan risk?
A steady source of income
You need to show that you have a stable occupation that pays and will continue to pay you a good salary. Banks tend to look more favorably on people who have a solid employment history. The longer you have been at your job, the better it looks.
Your credit history shows your repayment patterns and how you treat debt. This could include your credit card history or previous loans that have been repaid. Basically, if you treated your previous- and very probably smaller debt/loan -promptly and diligently, the lender can take it to mean that you can be relied upon to do the same with this loan.
Even with a stable job and a steady income, banks will have to look into your debt-to-income ratio. This compares the amount of money you owe against the amount you earn. In short, the bank will assess whether your earnings are sufficient to cover the expense of the loan amortization along with your living expenses and current debt payments.
Applying for a housing loan is a major and often, nerve-wracking step. Still, keep in mind that there is some truth to their advertisements. Banks want to approve your loan, but their responsibility to their customers demand that they ensure you meet the qualifications. It’s up to you to convince them that you do.