Applying for a mortgage can seem like a daunting task when starting out. That’s why it is important to research what banks and other lenders are looking for in a loan application. Finding some simple information on the topic will instantly reduce any anxiety you have about the process, and also increase the chance your loan application is approved. This will make a potentially stressful process go as smoothly as possible. Here are 3 easy ways to make sure your mortgage application has the best chance of success.
Explore Your Lending Options
Many first-home buyers will opt for banks straightaway as their mortgage lender. This can be costly, because there are in fact a multitude of other lending options. These can often drastically differ in rates and conditions. Moreover, depending on your situation, other lending options may be more likely to approve a loan. Banks, for example, are beholden to their investors, so often are very strict on what loans they will approve. Thus, to maximise your chances of approval, you should explore as many lending options as possible. Direct lenders, for example, are private firms or individuals with large cash reserves that specialise in selling mortgages.
As such, they are generally more flexible in their conditions, and consequently more likely to approve certain housing loans. Some, like My Midwest Mortgage, even have specialist knowledge of specific areas, so can be useful sources of advice on housing options when relocating.
Maximise Your Credit Score
Your credit score is one of the most important factors lenders will take into account when deciding whether to approve your loan. It is therefore vital that you get your credit score as high as possible, to give yourself the best chance at loan approval possible. The most effective way of doing this is by paying off as much of your current outstanding debts as possible, and by making sure your credit bills are always paid regularly.
If, for any reason, you cannot do this right now to help the costs of purchasing a property, you may want to wait a while before applying for a loan. This way, you can build up a history of regular bill payments that will incrementally increase your credit score. Not only will this make you much more likely to be approved for a mortgage, but it can also decrease the interest rates on any mortgages you are offered.
Put Down The Highest Possible Deposit
When it comes to home loan deposits, many lenders will offer mortgages with deposits as low as 5% of the property’s agreed price. For many individuals however, it may make sense to save for slightly longer so you can afford a larger down payment. This is sensible for 2 key reasons. First of all, paying a larger deposit will automatically reduce the interest rates on your loan. Secondly, a bigger down payment will also exponentially increase your likelihood of approval. This is because a 20-30% deposit on a property means the lender will take on significantly less risk than one at 5%. If you are able to afford a higher deposit on your mortgage, lenders will also consider it less likely that you will default on future payments.
