Interest rates are currently at record lows, which is a good thing for consumers. It means that you’ll be able to take out a home loan relatively cheaply, especially considering that five-year fixed rates are at 5.21% on average, while variable rates are currently 5.19%.
However, lenders are still fairly picky when it comes to approving loan applications. Lenders will set certain requirements that you must meet to assure them that you can afford the loan, and that you will keep repaying the loan well into the foreseeable future. So here are 3 simple things that you can do to make your situation more appealing to lenders, starting with…
1. Having a positive credit rating. Your credit report is the primary gauge that lenders use to assess your credit worthiness. This contains detailed information on loans you have taken out, loan applications you currently have, late payments you may have made, credit limits, and whether or not you have for bankruptcy.
It is therefore important that you get your mortgage broker to access a copy of your report prior to making a loan application. That way, you will be aware of any discrepancies you may have, or erroneous entries in your credit report, so you can address them right away. Don’t worry though if your credit history is less than stellar, as there are lenders that offer non-conforming loans, which your mortgage broker can help you access. Although the interest rates with these types of loan are typically higher than regular loans, you can use it to transition into a better loan as your finances improve.
2. Providing adequate proof of your ability to repay the loan. Lenders will closely examine your income and your expenses. Firstly, this helps ensure that you are not spending more than you earn. Secondly, lenders like to know that you are capable of paying your loan repayments. Lenders do this because they are required to exercise responsibility in ensuring that you can actually afford the loan that you’re taking out.
3. Saving up money regularly. You also have to establish that you are financially responsible. One way you can do this is by opening a savings account and depositing money into it regularly. This will show lenders that you are disciplined when it comes to your money, and that you don’t spend all of it as soon as you receive it. Proof of savings will also be important when you have to come up with a deposit for a big-ticket purchase such as a car or a house. If you’re having trouble saving up money right now, it will be a good idea to start budgeting your money today.
All in all, making yourself more appealing to lenders is mainly about showing that you are financially responsible, that is that you don’t spend more than you earn, you pay your debts promptly and you actually save your savings. These simple factors will go a long way in helping you take out a loan that is best suited to your needs.
Getting help is also essential. A mortgage broker will know all of the lenders’ requirements prior to you applying for a loan and can help guide you through the process to ensure you find the right finance solution for your objectives.
Written by Steve Milligan