Published: August 17, 2013 | Updated: January 29, 2020 | Posted by: Moneymax | Loans
Buying a house is one of the biggest decisions one can make. Having devoted plenty of energy and time for our down payment, researching and applying for a home loan begins.
Despite this, there are still many real-life examples of home loan applications being rejected even when borrowers have the ability to pay for the down payments. Here, we list the things one should avoid when applying for a home loan.
Read More: Are You Ready to Buy a House?
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If you have found your dream house and a home loan is the only thing stopping you from getting it, here are some important dont’s when you are going to apply for a home loan:
In short, you need to make sure that you do not engage in any activities or purchases that add to your existing financial burdens. Any actions that increase the risk of your financial portfolio send an alarming signal for the bank. They may reject your application for a home loan if they are not convinced that you have the ability to pay the monthly amortization.
Your debt-to-income ratio is used by the bank to determine how much of a home loan you can afford. Purchases of big tickets items such as cars, home theater system and expensive furniture which suggest more debts to the home loan applicants increase this ratio. At the same time, these purchases also indicate more risk for the banks. That goes for the cash deals, too.
Banks will check out your cash reserves when they approve a loan. If a new purchase increases your debt load, it can disqualify you from the loan or deplete your funds to close. Decorating and designing your dream house with the trendiest furniture is a thrilling idea, but it is better to just postpone it after having the home loan approved. There is no need to rush to purchase furniture when your home loan is not approved yet.
With a goal to help Filipinos lead healthier financial lives, Moneymax regularly publishes tips and tricks on personal finance and lifestyle, among many other topics. For more finance-related news and articles, follow Moneymax on Linkedin.