Whether you are looking at starter homes or luxury homes, you may need to secure funding to make your purchase. When it comes to winning a good home loan deal from a lender, there are a number of different factors that are considered. On the basis of these factors, the lender company decides that if a person is eligible for a home loan and how much interest rate will be charged.
To get the best home loan deal, you have to make sure as a customer that your application is strong enough to convince the lender. In this article, we are going to share with you some of the tips and the important factors that the lenders look for an eligible home loan customer.
1. Credit Score of Applicant
No matter what type of home loan and rates an applicant want, either best-fixed home loan rates or best variable home loan rates, all is decided on the basis of credit score. There is an inverse relationship between the credit score and home loan rates. If your credit score is high, your home loan rates will be low.
Actually, your credit score is the reflection of your good history of paying all bills and loan on time in the past. If you have a bad history of credit score then the lender hesitate to give you a loan and if he decides to give a loan, the rates are kept very high.
2. Stability In Applicant Employment And Income
For a lender’s satisfaction, it is important that the applicant employment and income are stable. The duration must be a minimum of 2 years. A record of instability in past employment and continuous fall in the income would disqualify an applicant. This is because employment and income are a reflection of how capable a person is to pay back the loan in addition to property taxes and real estate insurance. Therefore, in most cases, the lenders do not trust the applicant.
Moreover, if they trust and allow you to take a loan from them, heir conditions become very stick. They will ask for a guarantee, income tax returns of past years, etc. All this is done to make sure that the applicant will not do any fraud or delay the repayment of the loan.
3. Cash Reserves Of Applicant
The third most important thing that many lenders check are the cash reserves of the applicant. He cash deposits include money, certificates of deposit, expensive jewelry, etc. The reserves of retirement plan are not included in this because they are only given after retirement and after cutting penalties and taxes.
Most of the times, the lenders demand cash deposits of almost around two months of loan repayment. Sometimes the lenders demand even higher amount. These reserves are kept on the record to get money in case the applicant fails to pay back in the future. This is taken in place of payment when the customer fails to pay at the required time.
These are the three most important factors that almost every lender consider before giving the home loan. They take care of the comfort of the customer as well, but just after doing the satisfactory investigation of everything. When lenders perform real estate marketing, they are looking for mortgage applicants who can meet all these criteria. Make sure all of these factors look favorable when you are applying for a home loan.