Written By- Jaya Pathak
Buying a home of your own is a dream possessed by many, but the process of approval of loan can often feel a bit tiresome. The home loan approval process requires endless paper works, evaluation of your finances and long term waiting periods; making the journey frustrating. But have you ever wondered that you can keep a track record of your loan approval and live the life of your dream home sooner than you have expected? With the inculcation of right strategies and financial discipline, you can actually speed up the approval process.
In this blog, we are going to give you some tips for getting fast home loan approval.
1. Checking the credit score: Credit card plays a very vital role in the determination of your home loan approval. Lenders uses your credit score to determine your credit worthiness and financial discipline. If you have a higher credit score, the chances are very likely that your loan will be approved. It will also help you to get home loan with lower interest rates. If your credit score is not that much impressive, then you can improve it as well. It can be done in several steps such as paying off your remaining debts and bills on times, maintaining a low credit utilization ratio, avoiding multiple loan applications within a short period of time, checking your credit report for errors and rectify them if necessary.
2. The source of income must be stable: You must have a stable and consistent source of income. Lenders prefer those borrowers who have a stable and consistent source of income as it assures the lenders about the ability to repay the loan. In order to have a stable source of income, you can continue a job or business for at least two years before applying for the loan. You can provide some proofs related to employment opportunities such as salaries slips, tax returns and bank statements as well. The frequent job changes must be avoided as it depicts uncertainty in your career.
You must ensure that your salary is credited directly to your bank account as it will provide a financial record. If you are self-employed, then you must maintain a well documented financial records and business statements.
3. Reduce your debt-to-income ratio: The debt to income ratio is basically the percentage of your income which is used to pay off the existing debts. Having a lower debt to income ratio will bring you an ease of approval of your loan. Lenders generally prefer to the borrowers who have a lower debt to income ratio. You can lower your debt to income ratio by paying off all your existing loans and credit card balances timely. You can restrain yourself from taking new loans before applying from a home loan. You can also increase the sources of your income in order to balance the ratio.
You can also reduce your monthly obligations so that you can consolidate your debts. You can avoid co-signing loans for others as it will increase your liabilities towards others and will reduce the chances of your home loan approval.
4. Saving the higher down payment: The higher down payment reduces the overall interest rates and monthly payments. It also help you to avoid buying high private insurance premiums. Borrowers who pays at least 20% of the amount of any goods and services, chances are quite likely that their loans will be approved. There are plenty of benefits of higher down payments such as it reduces the risk of lender which leads to a quicker approval. It also reduces the interest rates. It minimizes the need of any private mortgage insurance. It helps you to build home equity faster henceforth reducing future financial strain.
5. Choose the right lender: You must be very attentive while choosing the right lender for your home loan approval. Not all the lenders have the same loan approval process. Some of the financial institutions have strict requirement while others can approve your loan with minimal documentation. You can select the right lender for you by comparing interest rates and loan terms from multiple lenders. You can also see sure customer feedback and customer reviews. You can also consider working with mortgage broker for better deals and guidance. You can also evaluate the lenders customer service responsiveness. The borrower can look for the lenders who offers digital as well as instant home loan approval services.
6. Pre approval for home loan: Getting a pre approval for your home loan will ease the overall process of the approval of home loan. Getting a pre approval will give you a clear picture about the eligibility of your loan as well as it will also speed up the process. There are numerous benefits of pre approval including helping you to set a realistic budget, reducing the loan processing time, allowing you to negotiate better deals with sellers, strengthening your position as a buyer.
7. Keep all the required documents: The inaccurate and incomplete document tradition is one of the prominent reasons for delays in loan approval. The financial institution require certain specific documents to verify your identity, source of income and property details. Therefore you must keep all the documents needed prior to applying for your home loan. Some of the essential documents needed for faster approval it includes an identity proof (such as passport, aadhar card, driving licence), Address proof such as voter ID card, income proof (such as salaries slips, tax returns), bank statements, property related documents.
8. Shorter home loan tenure: A shorter home loan tenure reduces the risk of lender and increases the chances of your loan approval. There are plenty of advantages of shorter loan tenure. When you opt for a shorter loan tenure, it reduces the total interest which you are required to pay to the lender. A shorter loan tenure also depends on your financial discipline to the lender. It will help you to clear all your debts fast. It will increase your equity in the home at a faster rate.
9. Do not make any large financial changes: The chances of your approval of home loan depends entirely on the stability of your source of income. If you make any sudden changes in your financial situation, it will negatively impact the overall approval process. It might happen that your loan approval process might get delayed. In order to avoid any financial changes, you should avoid making massive purchases, switching jobs as it depicts uncertainty, taking additional loans or credit card debt, making unverified large deposits into your bank account.
10. Addition of co- applicant: You can consider adding a co- applicant. The co- applicant can be your spouse, parents. Addition of a co- applicant increases the combined income which is required for the loan eligibility. It also reduces the risk for lenders which will be quite beneficial for you to get your loan approved fastly. It will improve the chances of securing a lower interest rate. Overall, it will enhance your financial credibility.
11. Apply for the right loan amount: Applying for the right loan amount is quite crucial. If you are requesting from a financial institution such as a bank for a loan amount which is too high compared to your source of income, it may lead to delays or even rejection in approval. If you are not very much sure about choosing the right loan amount what your home, you can use an online loan eligibility calculator which will give you clear picture about the loan amount which you might consider. You can keep a track record of the EMI which is affordable within your budget. You can also consider future financial commitments before deciding the loan amount. You must choose the loan which aligns with your long term financial goals.
Conclusion
In a nutshell, the foster home loan approval requires a strategic planning. The borrower must be proactive. Before applying the loan, the borrower can improve his credit score, maintain a stable source of income, reduce all the debts which has been taken, choose the right lender and keep all the documents which might be needed. These are certain tips which can increase your chances of securing a home loan quickly. If you follow these steps, the loan approval process will not only speed up but you can also get better loan terms which will make your home buying journey hassle free.
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