How To Apply For a Home Loan
For many people, applying for a home loan is one of the most exciting times of their life, it signifies independence and eventually owning their very own little piece of the world. Many people will apply for a home loan at some point in their lives but there are one or two points which can make the whole process easier. Historically the ease of getting a home loan has peaked and troughed, depending on the economic climate at the time, but nevertheless there are a few things which you need to know to make the whole process simpler and easier to understand.
The Lender- if you are a new client and have no existing relationship with the lender you have approached, then you’re going to have to prove that you are who you say you are. It’s no good looking in the mirror and saying “yes, that’s me” you need proof, drivers license, birth certificate, crediit card, that sort of thing. Don’t bother with copies either, only the originals will do. You need to have 100 points worth of proof, a birth certificate is worth 70 and a drivers license 40 so that should do the trick.
Questions to Answer – Some home loan application forms are pretty thorough with as many as 10 pages. It’s not a case of a couple of tick boxes and sign on the dotted line, you’ll need to have loads of information ready at your finger tips if they are going to consider lending you enough money to buy your own home.
- Do you have the capacity to repay the loan?
- Are you classed as a “good financial risk”?
- Is there adequate collateral in the property you’re buying?
- Do you have any existing assets?
- Do you have children and/or other dependents?
- How long have you been at your current address?
- Do you have any outstanding debts?
- Do you own any other properties?
- Do you have personal insurance?
- Details of your accountant
- Do you have any credit cards – with full details!
- Inside leg measurement – who you sat next to at school – name of first pet . . . only joking but you get the idea!
Stuff to Take With You – you need to make sure that you have all of the necessary documentation to support anything you’ve put on your application form. Check with your chosen lender but you’ll probably need at least two of your most recent payslips and your group certificates from the past couple of years. You’ll also need something official from your employer to confirm how long you’ve been in their employment – it usually has to be at least two years. If you’re self-employed it can be a whole lot more difficult however. You’ll need details of your accountant, tax returns, financial statements, you might even need your profit and loss statements from the accountant. Check it out before you go!
You might also need to show proof of any savings you have, savings account books, proof of what you owe (car loans/credit cards etc) in fact, you could need up to 6 months statements to confirm any credit card activity. If you do have a life insurance policy take the details of that with you too.
How Much Can You Borrow – this will depend on exactly what you’re buying, and how much money you have left at the end of each month when you’ve paid off your other loans etc. Many lenders are willing to lend you up to 80% of the property purchase price, maybe up to 95% if you’re lucky and willing to take out a mortgage insurance policy. Take a look online at one of the many online calculators, they’re really clever and tell you almost instantly how much you can borrow in relation to your income, and what your repayments will be.
Don’t forget that there are other costs involved when you are buying a property, so you’ll need more than just a down payment. You’ll have to pay taxes and other fees depending on the price of the property. Make sure that you know exactly what you’re letting yourself in for before you commit yourself to anything.