Factors that Can Affect A Home Loan

A Home Loan is no small thing. It is a  long term commitment that usually stays with you 15 to 30 years of your life. Because of this, so many important things have to be thought about and planned for and so many factors will decide whether you will get a Home Loan or not.

These factors can be divided into two. The first one would be those that you need to think about before applying for a Home Loan and the second would be the factors about you that lenders have to consider before approving your Home Loan.

Let’s first consider you.

Before you can choose the mortgage for you, you have to review your financial situation and project if your housing needs might change in the future with your Home Loan. You can ask yourself these questions to help you with this:

How long do you think you plan to stay in your house?

– Are there expectations for your financial income to increase over time which could allow you to pay more off your Home Loan?

– What do you think are the significant expenses you might make in the future that could affect your capability of paying your monthly payments? School fees, starting a business, starting a family, etc are examples of things that may affect your financial situation.

The next step is to assess the level of risk you are ready and comfortable in taking. Remember a Home Loan takes a long term commitment. Decide on what mortgage rate you think you can work with. Variable interest rates can be risky since interest rates change and can vary where as with fixed rate home loans can be a safer option if you like to know what your payments will always be.

The third step is to determine the term of the loan you want.   Most terms are 15, 20 and 30 years. Usually, a shorter term means higher monthly payments. This is good for people whose incomes are higher than average and are stable. But, most average income earners go for long term periods because aside from a smaller monthly bill that can fit their budgets.

The last step is to assess the closing costs of a Home Loan and the lowest interest rate that you can get.

Now, let’s consider the factors that might affect the approval of your Home Loan from lenders. There are ten of these which are the following:

1. Credit report. When you apply for a loan the credit provider can take your credit history into account when deciding whether to give you a loan.  Credit history reports are available from Veda Advantage (previously known as Baycorp Advantage), Dun and Bradstreet, and Tasmanian Collection Service.  For more information about Credit Reports click here

2. Credit Cards. Always be sure to keep your credit card payments on time as poor credit card history can affect your chance of getting a home loan.  Some banks may require you to reduce your current credit card limit.

3. Outstanding Credit. Pay off as many if not all credits before applying for your home loan.  The less you owe the better.

4. Income. The steadier your income the better.  Avoid changing jobs before applying for a Home Loan.  The longer you have been in your current employment the better it is.

5. Available funds. Make sure that you do not make purchases that could consume your available funds before buying a home. Aside from a down payment, you have to consider other expenses such as legal fees, stamps duty etc.

6. Deposit.  The bigger the deposit the better!

7. Interest rate. Interest rates fluctuate all the time and if you have a variable loan your payments will also fluctuate an will determine how much you will have to pay each month.

8. Price Range. From your current financial assessment of your situation and by figuring out your debt-to-income ratio, will determine how much you are able to borrow . A lender will not approve a Home Loan with payments you can’t meet.

9. Lender. Know your lender and inquire about the statistics concerning those Home Loan applications.  This is where dealing with a mortgage broker has it’s benefits.  A mortgage broker will know which lending providers will best suit your financial needs.

10. Your honesty. Be honest when filling out all the paperwork involved with your home loan application and the lender requires from you to  process your loan  application.

For more information regarding Home Loans contact the team at Equity Access Australia call 1300 655 616