This post was last updated on March 9th, 2021 at 12:53 pm
Be it your first mortgage or any subsequent loan, it is always tough to get an application for a mortgage loan approved. The process is usually very detailed, particularly if you have applied for a loan with a bank. From checking credit score to bank statements and previous debt history, financial institutes take into account a lot of factors before approving a loan application.
To make the entire process easy for you, we have jotted down some effective tips you can follow to improve your chances of getting a mortgage loan approved. Take a look at them:
Analyze Your Credit Report
The first thing you need to do is to check and thoroughly inspect your credit report. Make sure it doesn’t have any mistakes. Your loan application approval is going to depend heavily on your credit history. Therefore, ensure that your credit report is completely checked and free from any errors.
Improve Your Credit Score
Banks are more likely going to outright reject your loan application if your credit score is poor. For those who do not know, a credit score shows the creditworthiness of a person. It is determined on the basis of numerous factors, including the history of credit, outstanding bills, hard inquiries, etc.
Suffice it to say, having a good credit score is important if you want to get a loan application approved. Therefore, you must start improving it well in advance if you plan to apply for a mortgage. There are numerous ways you can do so. However, bear in mind that the score is not going to change overnight. If you want to improve your credit score, it requires ample planning.
Make a Bigger Down Payment
In case it is a home loan, making a bigger down payment can help secure mortgage approval. Furthermore, the higher the down payment, the lesser you borrow. And with reduced borrowing, there will be lower interest as well. However, this greatly depends on the financial institute you have selected.
Make Sure You Have a Stable Source of Income
Not only banks but private lenders, too, are going to check your source of income before granting loan approval to you. They won’t approve the application if you are unemployed. In case you run a business, if it isn’t making good returns, your loan application is more likely to get rejected. Therefore, applying in such circumstances is going to be a waste of time only, in most cases.
Clear Your Existing Debts
The lesser (bad) credit you have on your name, the higher your chances of getting a loan application approved. So, try and clear existing debts, particularly big ones, before applying for a new loan. Furthermore, only apply for a second mortgage if you are 100% sure that you can manage them both effectively. Otherwise, it can become a big hassle for you. The interest will keep piling up, making it difficult for you to become debt-free if you are unable to manage multiple mortgages in an effective manner.
Make Your Pick Wisely
There are numerous options in Canada for those looking to get a home mortgage loan. However, bear in mind that banks are rather strict with their regulations. They have a set of guidelines to follow; thus, don’t expect them to show any flexibility to cater to your needs if your credit score is below part or you do not meet any other prerequisite.
Private lenders, on the other hand, can show more flexibility in this regard. Therefore, applying for a loan with them can brighten your chances of getting approval.
In a nutshell, taking a loan is a big decision, particularly if it is for getting a vehicle or home. So, make sure you have thought it through. Only take this route if you’re completely sure.