When applying for a loan, the application process and the lender’s checklist can be mysterious. Most borrowers recognize that factors like credit history, salary, debts, assets and price of home will play a part in whether you are approved or denied.
How do all these factors come together? What can applicants do to make sure they have the strongest chance at a mortgage, home equity loan, second mortgage or other financial products that are available?
Be Honest with Yourself About your Strength as a Candidate
Above all else, go into an application process understanding where your weaknesses might reside. If you don’t have a full-time job or you have a weak credit score or you have a large amount of consumer debt—these are all things you must speak to and rectify.
What do Lenders want to see in an Application?
Lenders want the process to be as clear and transparent as possible. They want to attract the right type of borrower, which means one that carries the least amount of risk.
At the top of the list, they want an applicant with a positive credit reputation, steady monthly income and one that can clearly demonstrate an ability to repay the loan.
Does it Matter Where the Money is Spent?
There are several variables that make a clear answer to this question murky. If you are buying a home than the price and condition of the home matters, you might even be subjected to a home inspection.
If it is for home renovations, medical care or education, you usually don’t have to provide much further context.
Focus on these Parts of your Application
To be a strong candidate, work towards bettering your credit score and ensuring you have some assets to your name. While these are easier said than done, small improvements in both can lead to a greater chance at approval.
For second mortgages and home equity loans, the more equity you own in your home, the more funds a lender can provide to you.
Applying for loans of all types can be complicated. The more boxes you check off, the more likely you are to receive exactly what you want with appealing terms.