A few key factors tend to influence your borrowing capacity under all circumstances. But there is actually a single important factor that helps in determining whether you can own a home or not. Gaining a fair idea of how much you can borrow is of great help when you’re considering multiple properties simultaneously.
Once you gain a fair idea of your actual borrowing capacity, you’ll be able to adjust your property search accordingly. You may even achieve a few options that fall within your budget once you do your research. Many of you may simply be wondering about the factors that can prevent you from achieving the desired loan amount and the maximum amount that you can borrow. So here are a few ways to have a better chance of borrowing a larger amount:
Prior to issuing a home loan, a lender has to determine the extent of mortgage repayment that you can afford. Apart from your income, the lender is bound to check out the commitments you have towards other outstanding debts.
A greater repayment capacity will enhance your power to borrow, more so, when you co-own a property with a relative. Your financial commitments may include vehicle financing, credit card repayment, repaying loans and other debts.
The amount that you can borrow may also be easily determined by the interest rate and the loan term that you sign up for. As the rate of interest falls, your repayment amount also gets lower. By opting for a short-term loan, you’ll end up saving much of the loan interest. You must accept a loan repayment term that matches your financial situation.
Your loan application can only be approved after your lender has gone through your living costs. School fees and the cost of child care are among charges that increase your living cost. Once the lender can identify your borrowing capacity, it becomes much easier for you to sort out these expenses. Even after maintaining a certain living standard, you’ll need to work towards repaying the mortgage.
Your credit rating is certainly an important factor that determines your borrowing capacity. By proving your worth as a reliable borrower, you’ll be able to convince the lender for a much higher loan amount. However, you’ll also need to repay the loan amount within the specified time-frame. Your loan application may be rejected if you’ve defaulted on repaying your utility bills and credit card bills in the recent past. Before even visiting a lender, you must check out free copies of your credit report for free from each of the 3 credit reporting agencies. All of the red flags appearing in your credit reports need to be compared and any discrepancies need to be resolved.
In an attempt to identify your actual loan requirement, a lender can run a credit check on the assets owned by you. All of the vehicles that you own, as well as your investment options, might affect a lender’s decision. These factors hold considerable ground in determining your loan requirement.
Keeping these factors in mind, you’ll need to work on all areas of opportunity just to enhance your borrowing capacity. This way, you’ll have more options for comparing loans and fresh offers that come your way.