Buying a house can be a daunting task for first-timers. Because of the rising home prices in recent years, many people may remain content with renting a house instead of buying one. But with the assistance of Customers First Mortgages & Insurance home loans in Sydney can be achieved and aspiring homeowners can now fulfil their dream of having their very own home without having to wait and save money for years.
What You Should Know about Getting Home Loans
According to experts, applying for a home loan is pretty much like letting other people read your diary. You have to provide a lender with your financial details, among other things, to give them the assurance that you can pay back the amount of money you intend to borrow.
Fortunately, you can take some of the unpleasantness out of the process by knowing in advance what the lenders are looking for. Aside from this, equipping yourself with proper knowledge can help improve the chances of your home loan being approved.
There are five Cs of credit lenders use to determine your ability to pay your mortgage. They are:
1. Credit History
A credit history is a record of your responsible repayment of debts. Because your lender will want to make sure that you’ll be able to pay the money you’ve borrowed back, you have to maintain a clean credit history to get a quick and hassle-free loan approval.
The capital basically outlines the assets or properties you’ve accumulated over the years. The lenders will take a look at yours to ensure that you have the capacity to pay back your loan.
The collateral is the property you’ll use as a security. In this case, it’s the house you want to purchase with the loan. If you’re unable to pay back your mortgage in the future, the lender will repossess the house.
Capacity is your ability to service your debt. It is measured by your current income against existing debts and the proposed amount of money you’ll spend to pay back your loan. For example, your housing costs shouldn’t exceed 30% to 35% of your gross income, while all of your debts shouldn’t exceed 40% to 45% of your gross income.
Character is the combination of all the four other Cs discussed above. To further determine your character, your lender may also conduct subjective and objective assessments such as identifying your current job and how long have you been working as such, as well as how long have you been living in your current residence.
Tips for Getting Approval
Compare home loans to see which lender can offer you the assistance you need. After choosing the best lender, see to it that you submit all the necessary documents the lender requires to ensure that your loan application will be approved,. You can also bring in a letter that states your income or pay stubs showing the source of your down payment for the property you want to buy.
In case you don’t have a credit history, try to build one prior to getting a loan. You can do this by getting a credit card and using it for your personal or home purchases or getting a personal loan. Make sure to pay your credit card bill or personal loans on time to show the lender that you have a solid credit history.