Whether it’s your first time in getting a loan for a new property or not, there will always be some things that need to be taken note of as lenders may sometimes have specific requirements and may inspect certain information about you before approving you for a loan. An approval is highly successful if you have everything in order and things will go smoothly and quick once you are sure that everything is prepared and standards are met. Here are 5 steps to getting finance ready.
Take Care of Debt
If you currently have any debts that need to be paid, then you should handle these before anything right away. Most lenders will take notice if you currently have debt that needs to be paid off which will affect their decision if you are eligible for a loan. Currently being in debt may affect the decision and you might end up not being approved so be sure to settle any current debts that you have, even if it’s a small loans in NZ.
Credit cards that are active may also be taken into consideration as any open credit cards mean that you may plan on using those credit cards which means you will owe that company and that tells them that you will have debt to both the company and them, making it seem like a risk to approve your loan. Settle any payments for your credit cards and if you have open ones, close them so that they know you aren’t out to use that credit card, increasing debt elsewhere asides from the loan you are applying for.
History of Credit
Lenders may access your credit history and determine if you have a good credit score, if you have unpaid debts or debts that you neglected to pay, the chances are you may not be approved. If you are late on a payment, you can pay in advance if capable for that debt to improve your credit score. A history of bad credit will usually end up with you not getting approved so as early as possible settle your accounts and try to improve your credit score before applying for a loan. Dependent on your credit score will determine the type of home loans which are available to you – so spending the time to get your credit score in best shape can provide you with significant savings over the long term. If you were wondering does refinancing your car hurt your credit, here is where to find out.
Employment Details
Your history of employment as well as your current employment status is something that lenders will want to know about as additional details. This is to check if you will be capable of paying them on time and if you actually earn the sufficient amount that will allow you to pay for the debt as well as your own needs. If the amount you make appears to be less than how much you will need to pay, without any other sources of income you will most likely not get approved. Make sure you can handle the plan you are aiming for in advance so you can confidently apply for such a loan.
In the even that you are not employed, other sources of income may be used for checking eligibility but different types of sources will need further inspections such as more info given or other documents requested to be submitted. This is all in order to make sure they do not take a risk as the payment on time is a must for most lenders.
Figure Out Your Budget
Most of the time the borrowing capacity that you are offered will depend on your eligibility which is determined by both your source of income as well as your credit score. Based on you past transactions as well as your financial income, a certain amount will be available and it is best to figure this out by getting a pre-approval before diving in any further to make sure everything will go smoothly.
Depending on the lender, a certain percent of how much you will be borrowing should be coverable with your source of income, otherwise there is no guarantee you will pay them back on time which will of course end in your application mostly likely not getting approved. Apply for a pre-approval to make sure you are eligible to make a loan and so that you know how much your budget will be for the home you plan on owning.
Current Savings
Regularly make deposits into your savings to make sure that there is monthly proof of how much you make and can produce by the end of each month. Most lenders will check the past 3 months to see if you are capable of earning and paying back your debt. Make deposits in advance months before applying for the loan for a better chance of approval since depositing a large amount may still lead to an application not being approved. Your bank statement will show how much savings you have and how much you usually put into your account which will be assurance to the lender that you are capable of earning money to pay back the loan.
Getting an approval is very important and you must take note that there is a lot that can be checked for them to decide if they will approve of your loan. The best thing to do is be prepared in advance and take care of everything rather than apply for different approvals and wait for one to accept. Being prepared will make things much easier and may even end up with you getting a better plan for your loan.
