How To Apply For A Home Loan

How To Apply For A Home Loan

Before you apply for a home loan, you’ll first need to find out which is the best type of home loan for you with the best rates.

Once you know this and your happy with your choice, you’ll need to have proof that you will be able to repay the loan, your income, your living expenses, a good credit rating, proof of your employment (and also that it’s stable), a good savings history, your net worth and also a deposit that won’t be too much for you to afford.

Calculating what you can afford for your home loan

After you know what kind of loan you need, it may be worthwhile to figure out how much you will be able to pay back each month especially if you opt for a fixed rate loan. This isn’t just for you, so that you know you won’t get into debt; a lender isn’t likely to lend you the money that you need if they don’t think that you can afford it.

Living expenses

You’ll also need to calculate how much you spend just for your living expenses. Knowing what you spend can help you to get a better idea of how much you can afford for repayments. Plus, the lender will want to see this, too.

Credit rating

Having a bad credit rating could cost you extra money, as it could mean that you’ll get a higher interest rate when you apply for credit. You should make sure that your credit rating is okay and that it is up to date, because providing a lender with an out dated or incorrect one could affect your chances of getting the loan altogether.

Savings

To get a big loan like a home loan, you’ll need to be able to save money and prove that you can continue to save it.

Your net worth

You’ll also need to work out your net worth (which is basically a total of your assets minus your liabilities), and you must make sure that it’s realistic to avoid any issues later on.

The deposit

As you may know, you will need to put down a deposit and also any other costs which are associated with the costs of buying a new home unless you get a no deposit home loan.

Most of the time a lender will require you to have at least a 5% deposit, but if you’re able to put down a 10 to 20% deposit, then you could pay lower interest. Also, if you put down a deposit of over 20% then you may not need to pay Lenders Mortgage Insurance.