A home loan is like the first step toward your dream, but a simple mistake can shatter your dream of owning a home in minutes. So, make sure you are not making one by following this article.
Here is a list of 6 things that will help you must avoid at all costs while applying for a home loan.
1. A low deposit amount
Many home loan applications get rejected for this single reason. Normally, every home loan has a maximum loan-to-value ratio known as LVR. This number indicates the limit on how much of the property’s value you can borrow. In short, it determines the number of deposits required for that specific house.
Suppose a home loan with a maximum LVR of 80% needs a 20% deposit. To take advantage of this opportunity, you must buy a property valued at $400,000 and deposit $80,000 to allow you to borrow the rest of the money.
Home loans with low-interest rates have strict LVR limits. Most of them require at least a 20-30% deposit. Some lenders accept 10% or lower deposits, but you must pay lenders’ mortgage insurance or LMI. This will add thousands of dollars to the loan cost.
If you are a first-time home buyer, you can avail some government opportunities to help you buy a property at a 5% deposit without LMI. But only some specific lenders can offer this opportunity.
2. Ticking everything on the application
Owning a house is like a dream come true to many people.
So, in the excitement, some people tick everything on the application without understanding the real deal. It can be problematic if any major financial burden adds up.
The solution is simple. Review your loan weekly to find out ways to restructure it. This will help you to pay off your home loan in a short period.
Further, plan for the future and invest time exploring your home loan options.
3. House shopping before figuring out financials
We all like to purchase a lavish and beautiful house. But sometimes, our pockets don’t allow us to do that. If you are also in the same situation, it’s best to consider your budget before taking a tour of houses. This will save you precious time and also prevent disappointment.
Visit different open houses only after getting the confirmation on your loan. This will do two things. Number one is it will give you an idea about what you can afford, and second is you can buy your preferred house after seeing it. So, no more heartbreaks.
4. Having a low income
Your monthly income is crucial to prove your eligibility for the loan. It shows the lender if you can afford the mortgage. In case you are buying a house for yourself only, they will check your income.
If you and your partner are planning to take the loan, the lender will examine both of your income proofs. Generally, the mortgage stress threshold is 30%. Your loan repayment cannot be more than 30% of your household income.
In the opposite scenario, the lender will be less likely to approve your application. If you are in this situation and you have to buy a home for personal reasons, contact Real Simple Home Loans. They provide home loans even in emergencies.
5. Buying unnecessary financial products
Purchasing a new house is exciting but wasting your hard-earned money on unnecessary financial products is nothing but foolishness.
You don’t need to hold on to various accounts as it will complicate things and result in more money going out of your pocket. So don’t fall for marketing gimmicks; only focus on getting the home loan.
6. Bad credit
In the world of loans, there is nothing scarier than bad credit. When the lender examines your credit file, they will first check your credit score. A bad number can result in the rejection of your application.
So before submitting it to your lender, check it for yourself. See if there is any chance to improve it. And if you find any error, rectify it immediately.
Over to you…
Now that you know all about the mistakes, try not to make them again. Instead, reduce your spending and save as much as possible.