Purchasing a new house can be an exciting experience, but getting a loan can be exhausting. Typically, applying to financial institutions for a home loan can be a long and tedious process. Fortunately, there are a few things that you can do to speed up the process.
Consider Your Debt-To-Income Ratio
A debt-to-income ratio is a percentage figure that gives you insight into how much money you owe as compared to your monthly gross income. Keeping this figure low can work in your favour. Low ratios indicating lower debt can contribute to a lender approving your loan faster.
Maintain A High Credit Score
A good credit score is essential to loan approvals. Lenders tend to approve loans faster and offer better interest rates to individuals with good credit scores. If you have a low credit score, there are certain things that you can do to improve it before applying for a home loan.
Check And Report Credit Score Errors
Errors during credit reporting could lead to lower creditworthiness, even if you make all your payments in time. Using resources like credit card statements can allow you access to your credit report to challenge errors.
Get Preapproved
It is a good idea to set up a meeting with your banker to check your overall creditworthiness. This process can help you understand the maximum amount of funds that the bank would be willing to lend you. Preapproval of funds can better assist you in searching for a home within that price range.
Down Payments Are Essential
Generally, down payments for a home loan vary between 5% and 15%, in the UK. Lenders approve loans faster if a borrower has a significant investment in the house through down payments as this reduces the lender’s risk.
Avoid Large Purchases
Lenders could pull your credit and check your debt to income ratios several times while issuing a loan. Even if you are preapproved, large expenditures could affect your credit score or your ratio and lead to losing the mortgage.
As long as you are well prepared and organised, you can be on your way to a quick mortgage approval for purchasing your dream home.