5 Factors to Consider Before Getting Approved for a Mortgage
Applying for a mortgage is not a one-step process
Aside from checking the applicant’s credit score, the alternative lending company will also consider other factors that may affect the decision.
Therefore, borrowers should know which factors to consider and take care of to get the loan they need. Here are some ideas.
EXISTING DEBTS
People with outstanding debts such as car loans and credit card debts are more likely to get rejected by alternative lenders. If a person has a lot of debts, they have a higher chance of defaulting on the loan. Therefore, the lending company will not approve the loan application. While it is true that having a lot of debt can make it more challenging to get approved for a loan, there are still many alternative lenders who are willing to work with people in this situation. Finding a lender willing to consider your financial situation and work to find the ideal loan is critical.
PRE-APPROVAL
Some people apply for loans without getting pre-approved first. It is a mistake that can result in a loan denial. If you are not pre-approved, the lender will not know how much money to lend you. It is important to get pre-approval before applying for a loan.
Getting pre-approved for a loan is a simple process. The lender will then pull your credit report and score to see if you qualify for the loan. If you do, they will give you a pre-approval letter that states the amount of money you are approved to borrow.
GETTING THE BEST INTEREST RATE
The interest rate offered by lending companies is essential as it determines how much you will repay. A higher interest rate means a higher monthly payment and a higher amount of money paid back. On the other hand, a lower interest rate means a lower monthly payment and a lower total amount of money paid back.
Applicants will only qualify for a lower interest rate if they have a good credit score. When looking for a loan, it's essential to remember that the lowest interest rate isn't always the best deal. Some lenders offer a low rate but charge higher fees, so you must compare the loan terms before deciding.
FINANCIAL CAPACITY
When you want to go for a loan, you must have the ability to repay the loan. If you are going for a long-term loan, you must have the financial capacity to pay the loan for at least three years. Therefore, most lending companies would do a financial check on their applicants for security. When you apply for a loan, the lender will request your bank statements, tax returns and other financial records. The lender will evaluate your financial capacity and determine whether you can afford to repay the loan.
LOAN FEES
The loan fees are the expenses companies charge applicants for taking out the loan. The costs include the application fee, the origination fee, the closing fee and the prepayment fee. You should compare the loan fees before deciding on a loan. Some lenders might charge higher fees but offer a lower interest rate.
THE BOTTOM LINE
Getting approved for a mortgage is a tricky task. However, some factors applicants can consider to secure their deals and get the financial assistance they need. But before applying for a loan, it's best to look at these factors and see if they fit your capacity to handle a significant loan and pay it off in time.
Level Up Mortgages is an alternative lending company in Canada. We aim to try various mortgage strategies to help clients whether new buyers, real estate investors, and even the self-employed can afford their dream homes with the requirements they can provide. Aside from checking the credit scores, we also believe there are other means to get the eligibility they need for the loan. Inquire on our website and apply for a mortgage loan today.