In one of our previous blogs we have mentioned the various benefits of securing a home loan & how various home loan options are making it possible for a common man to make house purchase. However, in order to secure a home loan, it is essential to adhere to certain points.
Ability to Repay: Being able to show that one can repay a home loan is one of the key requirements for lenders. Although an institution won’t want to see a written budget as such, they will want to explore the current living expenses and financial commitments to ensure that loan amount can be re-payed.
If the overall repayments are going to increase with the new loan, the lender would be interested in verifying the channels through which the borrower plans to meet the liability. For example, the borrower may be paying a high rent which would cease once he gets possession of his new home.
Credit Ratings: Borrowers should make an effort to regularly check their credit report. This will give an idea of how many times their report has been accessed in the past years and whether there is any defaults or negative repayment history recorded. In case if there is something that isn’t correct, the borrower should get it corrected by contacting the lending company that has recorded it.
Cut down on unnecessary financial commitments: Existing financial commitments and personal debt can affect application in two ways. Firstly, when one applies for the debt, there would be an enquiry on the credit report of the applicant. Too many credit enquiries can be detrimental to the credit profile.
Secondly, the credit limits on all the cards are included in the repayments as if they are fully drawn. Credit cards, store cards, interest-free facilities and other personal loans indicate that one will have less surplus cash available to meet repayments on a new loan.
Savings History: Showing that one can manage their expenses as well as save money is a big drive for lenders. When looking to borrow, Savings serve two purposes. Firstly, it can help in meeting repayments. Secondly, larger the savings- less one needs to borrow and lower the risk involved for the lender.
Disclosure of Information: It is important that the borrower discloses all relevant information while applying for a home loan. During the process of due diligence, if the lender uncovers credit cards or other debts which were not declared, then the loan may be declined due to non-disclosure.
