You might have your eyes set on a potential dream home. However, looking for ways to finance your way into your home might seem daunting at first glance. Especially if you are still trying to get you’re your finances in order. Before anyone beats you to it and snatch’s up your potential home, we have come up with six ways to increase your borrowing power when it comes to securing a home loan.
1. Asses your financial stumbling blocks
The first step in improving your borrowing power is to admit your weaknesses, and dealing with them immediately. Track your financial history through factors such as your credit history; regular living expenses, property deposit, assets, income and commitments; and the value of the property you wish to buy. Go through these with a fine-tooth comb to find holes that could weaken your borrowing power. See if there are any possible changes, and cuts to make your finances appear in more of a good shape than they currently are. What you could do to improve your borrowing power is to grow your property deposit.
2. Stabilise your financial fort
You need to appear as someone who is stable and has control over their finances. Try to keep a stable employment and place of residence, which can increase your chances of appearing as a trustworthy applicant to lenders. Now is the perfect time to rid yourself of any credit cards you no longer make use of. Having too many credit cards can reflect badly, as it could project someone who is not stable in their finances.
If you own three credit cards with each owing $5,000 your lender will see it as $15,000 of debt against you. It’s advisable to let go of things that could sink your smooth sailing into landing a home loan.
3. Pay your dues
There is good debt, and there is bad debt. The only difference is, are you able to pay these on time? We sometimes take out loans that we think we can pay off, but life happens. Paying your outstanding fees on time, or in advance can swing things in your favour as you appear to be more responsible with your finances. Constantly keep abreast of paying outstanding fees. Your debt can be used as a stepping stone rather than a stumbling block to introspect your spending habits, and removing things that will affect your financial future.
4. You don’t have to settle
While you are still learning to flex your borrowing power, you don’t have to settle for the first loan that comes your way. It might sound good, or even look good, but is it really good value for you in the long run? You can look around for home loans that offer you the best interest rate for your income. Research what is on the market and see if you can find better interest rates from various mortgage brokers. This in turn can also save you some extra money. If your home loan is $300,00, and the original interest rate and payment is at 6.26% ($1,849.10) at a discount of 0.1%, you could end up saving $5,842.80 on your loan.
5. You can wield your secret weapon
Unless if you are a maths boffin, estimating how much you can borrow can be a bit tricky. When you are looking for a mortgage, it’s always best to know in advance what you can and cannot afford before you are met with the constant disappointment of being turned down. You can use a borrowing power calculator as a great tool. However, it does have its limits as it only gives you a rough estimate. Your next best bet is having a financial advisor who can assist you.
6. Saving will help you save the day
Start saving. Once you finished reading this make plans to not only cut down, but start saving. Small change might appear to be nothing, but an accumulation of this small change can make a difference when it comes to the term of your home loan. If you can set aside 20% of small change that you collect every month can help you pay off your mortgage.