Ins and Outs of Securing a Home Loan
by: marciafreeman on Wed, 26 Nov 2008 at: 1:57 PM Go to: Previous Article Next Article
Prior to buying a home, many potential buyers must ensure that they qualify for a home loan. Understanding and being prepared for the home buying process, especially qualifying for a home loan, will make the experience much easier.
A couple of things that banks look at when determining loan eligibility are your financial ability to pay back the loan, and how eager you are to do so.
Financial Means For Repayment of the Loan
Your ability to pay off a home loan is the most important consideration. A lender will look first at your current job and employment history. This will help the lender determine how secure you are financially. Factors such as length of employment at a particular place, or how long you have worked in one field are good indicators that you are financially stable and will have consistent income in the future.
In addition a lender or bank could examine your net income to determine the amount of debt you have incurred in the past. If you have outstanding debts, lenders must be sure that your income is enough to cover both the new home loan and the existing debts. If the lender determines that the existing debt (prior to the home loan) is too high, you may still qualify for a smaller home loan. Therefore, if you really would like a particular house and do not have extra capital for a less expensive loan, you should pay off as much of previous debts as you can before you apply for the home loan.
Compliance to Repay
Your ambition to repay is another big issue in procuring a home loan. Lenders often determine how likely you are to pay back loans in a timely fashion by looking at your credit report. The purpose of a credit report is to inform lenders whether or not you have paid past debts fairly and on schedule. If you have always paid loan installments on time and in the sum requested, you will be a more attractive borrower.If you have paid loan payments in full and on time, you have a better chance of getting a loan from lenders. Also, lenders will look at what you are buying the property for. If you are using the home loan for a residency, it is different than if you are securing it for an investment property because homes are more likely to be paid off in full.
Dont be surprised if lenders will ask for a detailed financial history when deciding if you qualify or not. a W2 form, tax return, portfolios and credit reports could all be included, as well as additional items. If you are able to give the lender all of this financial data and they can verify its accuracy, your ability to qualify for a home loan will increase.
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