Buying a home can be a major investment for most people. This is the reason why some potential buyers consider applying for a home loan. However, the ...
Buying a home can be a major investment for most people. This is the reason why some potential buyers consider applying for a home loan. However, the buying process will not be easy as there are some criteria that you need to meet to qualify for a home loan. There are certain factors that banks look for when evaluating ONQFinancial home loans. It pays to know what affects the approval of your application. Let us take a look at these factors.
Your Credit Score
Your FICO score, numbers between 300 and 850 helps banks and lenders determine your past credit history. The higher is your score, the better. On the other hand, a low credit score will give the bank an impression that you are a risky borrower and could make it harder for you to receive a loan. There are certain metrics that can affect your credit score such as your payment history, credit utilization, length of credit history, and others.
Amount of Your Income
How much money you are making will also affect the approval of ONQFinancial home loans. For banks, nothing is more important than your monthly income compared to the overall monthly housing costs. A big income is not a requirement for becoming eligible for a home loan. However, it will affect the amount of loan you can borrow. The bank will still look at your total monthly income from all sources. A good rule of thumb is not to buy a house when the monthly mortgage payment, insurance, and property taxes adds up to a third of your monthly income. You have a greater chance of having your loan approved if your monthly payments are less than that range.
Do You Have Current Loans?
Long term and ongoing debts such as car payments and student loans can also be considered by the bank when evaluating your home loan application. They will assess if such payments will affect your capacity to pay a mortgage loan. If the bank sees that such loans can already eat up your income and there is not enough to make monthly payments for your mortgage, it could have an impact on your chances of getting approved for a home loan.
Down Payment Percentage
Banks are likely to approve your home loan if you are willing to pay a 20% down payment. If you are able to pay more than that, the better. These days, it is rare to find easy and small down payments. Banks are looking for huge equities at the onset and 20% is usually the standard for showing your capacity as a buyer.
Ensuring a good credit history, sufficient income to make monthly payments, and a sizable down payment can all contribute to an approval of your home loan.