When the time comes to apply for a home loan, many would-be borrowers are shocked to learn that a few simple mistakes have cost them the chance to get finance. Lenders have several checks they run on all applications and if you’ve made these errors you might be out of luck. Fortunately, there are some things you can do to turn these things around and get approved.
Not Paying Bills on Time
- When you go to apply for a loan one of the first things a lender will do is look at your credit score.
- If you pay bills late, you might find yourself with a number of defaults. This is when a payment is well overdue. Defaults will hurt your credit score and can make a lender less likely to lend you money.
- It’s also important to note that there is so much data available to credit agencies these days, that they can tell just how efficient you are at paying your bills. If you are always late that doesn’t bode well for them, when the time comes for you to pay them back.
Many credit cards
- These days, just about anyone can get a credit card. In fact, many banks will send out letters offering to increase your credit card limit or give you another credit card.
- The problem is that while it might be great to have a $50,000 credit card limit when the time comes to borrow money from a bank, this limit will impact your chances.
- The bank assumes you have maxed out your card and will reduce your borrowing capacity accordingly.
- These credit card limits are often the difference between getting approved or coming up short.
- While it might be nice to drive the latest car or take out a personal loan for a holiday, these types of debts could be weighing you down.
- Personal loans, car loans and credit card debt all attract high interest rates and those monthly expenses add up and can really hurt your borrowing capacity.
- Lenders also don’t like to see these types of debts as they suggest you’re not someone who has good money management skills.
Applying for Too Many Loans
- Credit is often available If you’ve been applying for loans regularly and even worse, if you’ve been applying for loans and getting declined often, that is going to make it much more difficult to get a loan when you really need it.
- Every time you apply for credit it shows up on your credit record which lenders can easily access. Getting rejected or making lots of small applications for credit is viewed negatively by lenders and also tells them a lot about your money management habits.
- The best thing to do is to seek a pre-approval before officially applying for a loan. That way your mortgage broker can quickly and easily tell you how your application is looking and suggest changes to the way you’re managing your finances, if a loan is unlikely.
- If you can clean up your finances for a few months, a lender will be far more willing to take you on, as opposed to someone with a patchy credit record and lots of short-term debt.
For a construction loan, you first buy vacant land and then find a qualified builder to build your home.
With a house and land package, it is bundled together, i.e. when you purchase the land; you choose from any of the standard or customised home designs instead of waiting for a builder to finalise the designs and build your home.
Other than that, the way progress payments are made is similar.
With a turnkey property, the complete cost of the land and build is set out in a standard sale and purchase agreement between you and the builder.
You will typically have to pay a 10% deposit at the point of signing the contract with the balance being payable at completion of the build process.
In order for the remaining funds to be released to the builder, the house must be fully completed and ready to move in with your state’s equivalent code compliance certificate.
If you only have a 5% deposit (and you qualify for a 95% turnkey loan), the bank will normally lend you the additional 5% deposit to make up the 10% deposit required for the builder.