With interest rates at record lows and no sign of them rising, this is a great time to consider buying your first home or moving up the property ladder.
In my time as a real estate agent, I cannot remember money ever being so cheap. But that doesn’t mean you should assume a lender will give you the money you want.
Most lenders remain cautious simply because the state of the economy remains uncertain. So, it would be best if you did everything you could to make sure lenders think that you’re a risk worth taking.
A great way to begin that process is to reduce your consumer debt and repayments for items such as a vehicle and holidays. Also, reduce your credit card usage. Check your credit score to see how you fare and what you can do to improve it.
In these times, you should consider using the services of a mortgage broker, who will guide you on different finance products from multiple banks and lenders. They’ll also help you with the application process and paperwork.
I’ve put together a few ideas to help you apply for a home loan to help secure your first property or create the opportunity to find the property of your dreams.
- Avoid short-term debt, such as a loan for a car or furniture, before applying for a home loan. Monthly payments on these items will undermine the total funds a bank will loan to you.
- Clear the credit card. While this is a good tip at any time of life, be aware that lenders will look at your borrowing history. Your credit limit is likely to be part of that picture. Set a limit on your monthly spending. That way, lenders will see you use your credit responsibly.
- Put your card into credit each month. If you can make the transition, you’ll be using your credit card as a debit card. Again, this a great strategy to enhance the impression of smart money management.
- Understand how much you’re likely to earn once the pandemic is over. Has your income fallen, and will it bounce back once some form of normality returns to your work? It’s a question lenders expect you to answer confidently.
- Create a budget for your spending. This will demonstrate to lenders how you manage your financial obligations on a day-to-day basis.
- Be clear on your exact income. This is especially important if there are two of you making the mortgage application. Usually, loan requests require three payslips from each applicant.
- For the self-employed, income means profit. You’ll need to show a lender detailed financial records for at least two years to show you can make payments regularly.
- Check your credit record. There’s no harm in finding out how your credit profile stacks up. Potential lenders will look at this record as part of their due diligence. So, if there’s bad news around the corner, you should find out – and act now to turn it around.