Your dream of owning a property can easily be cut short by lenders with strict borrowing terms. This is the reason why you need to boost your borrowing power. Before approaching a lender for a mortgage or a home equity loan, you first need to assess and improve your borrowing capacity to look more attractive to lenders. This way they will trust you with a larger loan to finance your dream home.
There are various things that lenders look at before giving you a mortgage. Such things include your ability to repay the loan, your current income, and your credit score. To reduce any red flags and increase the chances of getting a bigger loan, then you need to organise your finances.
Look around for the best mortgage company that will be willing to lend you a huge sum of money to finance your property. A mortgage broker can help you get the best lender and also advice you on how to appear more attractive to lenders.
Here are a few tips to help you increase your borrowing power.
Close Down your Credit Accounts and Organise the Remaining Accounts
If you have access to various credit accounts, lenders will not be interested in lending you any amount. Therefore, you need to close down the accounts or reduce the credit limits in all the accounts before applying for a mortgage. You will also need to channel all your income into specific accounts for easy assessment. Your account history will help the lenders decide whether to give you a loan or not, based on the amount of money you have received in your account for the last two years.
Improve your Credit Score by Paying off any Outstanding Debts
Before a mortgage company can give you any loan, they first check your credit rating and how much outstanding debts you have. If your credit score is less and you have huge debts, then your chances of getting a mortgage become less. To improve this, you first need to pay off any outstanding debts with your savings before applying for a mortgage. Paying all your debts at once will improve your credit score prompting the lenders to trust you with their money. Paying your bills on time could also improve your credit score.
Find a mortgage broker who will advice you on how to improve your credit rating before applying for a mortgage. You can use an online broker who is faster and reliable to get you a mortgage easily, at no cost. Get a broker with years of experience in the wide mortgage market.
Lenders also check how much you spend. To obtain a bigger loan you will need to cut on the amount you spend on outings and other lifestyle choices. Pay all the necessary bills on time, but cut back on any unnecessary expenditure.
Get a Pay Rise
The higher your current income is, the easier it is for mortgage lenders to give you a loan. Your current income largely reveals whether you can afford your monthly repayments on time. Therefore, talk to your employer about a pay rise as a way of improving your borrowing power.
Extend your Loan Term
You can lower your monthly repayments by extending your loan term to a longer period. This makes repayments much affordable for you and lenders will, therefore, find it easier to give you a loan that you can comfortably pay.
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