Basic things banks look out for when assessing a home loan application
Usually, customers depend on real estate agents or 3rd parties to help them with home loan applications. This leads to them not completely understanding exactly what financial institutions take into consideration when approving or declining an application.
In some circumstances customers choose properties that far exceed what they can fairly afford with their regular monthly income. In addition, banks want assurance that you will certainly be able to pay for the home loan installments when expenses have been subtracted from your regular monthly income. In some instances where affordability is a concern, a higher down payment, joint bond application with a partner or member of the family, or property of a lower value can be taken into consideration. Obtaining a pre-approval ahead of a home loan application can assist customers determine if they qualify and whether a down payment will be required.
Low credit score
This takes into consideration the historic management of your finances. Lenders want to know just how well you pay your expenses and creditors and want to determine if you will be able to honour your month-to-month home loan instalments. Prior to making an application for a home loan, ensure you check your credit profile and taking restorative measures if required. Customers in South Africa have the right to obtain one totally free credit report, annually, from a registered credit bureau.
Unsatisfactory property evaluation
It is very important that the banks evaluate the property you are planning to purchase to make sure it is in good condition and that the property is not far off from its market value.
Unstable monthly income
When making an application for a home loan, you are required to produce your most recent payslip and 3 months bank statement. Loan providers need assurance that you get regular income. If you’re self-employed, you’re required to produce a minimum of 6 months’ worth of financial records or bank statements.
Incorrect declaration of expenses
In many cases applications get declined because expenses might have been duplicated. For instance: if you have a credit card that you may be utilizing to fill up for fuel and for groceries, you need not include the groceries section and petrol spend in your expenses.
Even though every application is unique and assessed on its own merits, you need take some time to comprehend what loan providers take into consideration when assessing an application. This will assist you buy your first house.
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