Acquiring home loans is neither a walk in the park or a show of far-fetched wish-granting shooting star. It is a reality that can build anyone’s dreams given the right requirement and financial ability. While many have been declined for home loans, the chances of having one approved can be increased. It is something that you work for while anchored by a strong financial record and history.
Do you have what it takes to be granted a successful home loan?
Let’s lay out the Five C’s where lenders’ decisions are hinged to when it comes to approving home loans.
CHARACTER
When talking about home loans or any other type of mortgages, your character is your credit history. It is a large factor that determines your eligibility for a home loan or your application will be pushed aside to the nearest trash bin. Your credit history details your reputation in matters of handling previous loans. Most financial institutions also use credit score which is a numeric value that spells your credit standing which will help future lenders assess risk when dealing with you. The higher the credit score, the less risk involved.
CAPITAL
While you may depend on your household income that basically will be the major source of your monthly repayments, financial institutions also look at some other things just in case unforeseen events or setbacks arise. This capital includes your savings account, property investments, and other assets that characterise value that can help you bridge through your loans.
COLLATERAL
They say that the higher collateral value, the better it works for your advantage. Collateral can be anything of value like a home or auto that will secure the lender if in case you default on your loan repayments. Your pledged collateral will be assessed and evaluated. The result of this plays a vital role in the lender’s decision-making process.
CAPACITY
Have you started calculating your debt-to-income ratio? The comparison between your newly acquired debts and taxable income speaks volumes about the home loan process. You will go through a meticulous credit investigation to assess your capacity to pay and manage loans. Your financial stability will be dissected and your employment history will be studied.
CONDITIONS
Do you agree with the interest rates stated? How about the repayment plans? Perhaps, the most frequently asked questions when applying for a loan is what do you need a loan for. The purpose of your loan application is also one of the determining factors that will help financial institutions decide in your favour.
Getting ready to apply? Find the right lender and be prepared to answer their queries.