Okay, so you have decided that the time has come to invest in your first property. You are most probably incredibly excited about the idea of buying a house. But before you count your chickens, you need to ensure that your mortgage is approved.
To make sure that your loan application gets a mark of approval, there are a few things that you need to do. Follow our four steps below and you can ensure that you get on the property ladder as quickly as possible.
1. Improve your credit score
Many mortgage lenders won’t touch applicants with low credit scores, or if they do, they will charge you a high interest rate. That’s why, when it comes to applying for usda home loans, you need to ensure that your credit score is as good as it could be.
The best way to improve your credit score is by ensuring that you don’t allow your bank account to go overdrawn or direct debits to bounce. You can use sites like Credit Experian to keep a check on your credit score - you can sign up for a free month's trial to get you started. They also offer tips and advice for improving your score, so it’s well worth signing up.
2. Pay off any loans
If you have any outstanding loans, before you even think about getting a mortgage, pay them off. Trust us on this, if you want your application to be approved, you can’t have any unpaid loans.
Your application is much more likely to be approved if your credit history is clear of unpaid loans. This is because lenders don’t like to lend to people who already have big financial commitments to keep on top of, like other loans.
3. Clear all other debts
If you have other debts, such as with an energy provider or your landlord, clear them before you apply. When looking at your application, mortgage lenders will look at the bills you have to pay each month. This includes any outstanding debts, they will then assess how much you can afford to pay back each month.
If you need to borrow over 50 percent of the cost of your property, you need to make sure that all debts are cleared. As the more money you want to borrow, the harder it is to get your loan approved.
4. Start saving for your deposit
To be able to get a home of your own, you need to have saved a small percentage of the money yourself. Most mortgage lenders favour applicants that have between 10 and 20 percent of the price of the property saved. However, the more you can save the better, as the interest rates are lower the higher your deposit.
It can be hard saving up for a deposit, especially when you have bills to pay. The easiest way to go about it is to put five or 10 percent of your pay each month, into a savings account. It might take you a few years, but eventually, you’ll have the amount that you need.
If you want to make sure that your mortgage application is approved, you need to follow the tips above. Clear any outstanding debts, improve your credit score and save a deposit, and you have a much better chance of getting a yes from your loan company.