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Are you financially fit to take out a home loan?

August 6, 2019

Before diving headfirst into the decision of buying a home, you should be sure that you are financially ready. It is okay to delay your home purchase dream in order to build yourself economically. Here is how to find out if you are financially fit to take out a home loan.

Can you stay on top of your bills?

If you are struggling to pay everyday and monthly bills, perhaps you should reconsider taking a home loan. Inability to pay off your bills can affect your credit score. A bill is considered late if you don’t pay it 30 or more days after the due date. You can build your credit score by paying your monthly bills on time. Try paying your instalment loan bills like the auto loan, credit cards, student loans, and mortgage before they’re due. This is an excellent way to rebuild your credit score and qualify for lower interest rates.

What is your credit score?

Your lender checks out for any financial missteps like foreclosures, missed payments, bankruptcy declarations, and late payments. A dramatically low credit score can disqualify you for a home loan; or if you do get a loan, you will be charged higher interest rates. Scrutinise your credit score before applying for the mortgage. You may decide to take steps to improve your credit score first, to secure the best deal possible.

Have you put aside some savings?

Buying a home can be costly. You will need money to pay the down payment, closing costs, moving expenses, and possibly repairs. Additionally, having three to four months’ worth of mortgage payments saved in your account can give your lenders confidence that you will still pay if you hit a financial crisis.

Is your preapproved mortgage good enough?

Provide your mortgage lender with copies of your financial statements to determine how many loan payments you can afford. You will then get a preapproval letter revealing how much you can get in home loans. This can guide you to avoid wasting time checking out houses outside your limit.

Are you wondering if you are financially fit to take a home loan? Call Empowered Finance today for proper guidance.

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