When it comes to mortgage application and its process, the discussion would always boil down to the importance of your credit rating. It seems that your credit score will be one of the biggest factors that will determine whether you are getting that approval for the loan or not. While the credit rating may be a great indicator of a person’s financial stability and spending habits, it is only one of the many other factors that lenders consider when deciding for the approval of your application or not.
Thankfully for those whose credit rating isn’t so good, there are a couple of other factors that come into play. If you have a good credit score yet struggling to get a loan approval, read on to find out what could be the culprit to your problem.
Ratio of Income to Debt
The credit score may say a lot about you and the money you have saved and spent so far, but your debt to income ratio means a lot more. It describes the discrepancy between the money that you are earning and the money that you are spending. Remember that mortgage loan lenders go for people whose income is enough not only for their daily survival but also for the loan payments they will be making. Your source of revenue says a lot about whether you are getting that approval or not.
The goal is that the amount you are earning should be way more than what you owe. To be on the safe side, your debt, including the money that you spend on utility bills and other financial obligations should not be more than 45% of your total monthly earnings. This figure shows lenders that you have a high financial capability of paying for the loan you applied for. Also, it will assure them that you don’t have outstanding loans you cannot pay for when you have the mortgage loan approved.
Cash Savings In Financial Institutions
Buying a house for yourself comes with over the top costs. Apart from the closing costs of the mortgage loan application, you will have to consider payment for home insurance premiums, taxes and other fees that may come with buying your house. Potential lenders will want to see if you have set aside enough to be able to cover all the payments you need to make. The cash in the bank will allow you to establish a sound financial record that could readily speed up the process.
If you’re not sure why your loan application is still not approved, talk to a mortgage advisor. They will be able to address all your queries and concerns.