March 8, 2017 No Comment. Posted in Financial Literacy

Mistakes are a part of being human. Of course, taking a loan from a Bank / NBFC is not a cakewalk these days. There can be certain mistakes that we do while applying for the Loans from NBFC/ Banks which can be avoided to increase the chances of securing a loan. Correcting the application errors can prevent delay in the processing. It is important to know which types of errors can affect the processing or possible disqualification of a mortgage application.

While submitting a Mortgage Loan application the applicant should pay close attention to the information he or she is providing to the Official. The information provided on an application is used to determine the amount the lender will lend. Smaller errors, such as a wrong phone number, address or date, can be corrected and do not usually hold up the processing of an application or affect the amount of the loan. A well presented accurate and detailed finance application is imperative for obtaining fast approval.

Here are few things which need to be avoided while filling a mortgage loan application:-

1) Not being honest about your financial position

Surely it’s never good to lie and when it comes to your mortgage withholding certain truths or lying in order to make yourself appear a better overall financial candidate for a loan can really come back to haunt you. Missing monthly loan repayments on credit cards, personal loans and mortgages is a common reason mortgage applications get knocked back. Lenders will always look at the conduct of your existing credit facilities to ensure you are meeting your obligations before approving further credit.

Any information you put on a mortgage application like outstanding debts or even past settlement of loans — can all be verified right down to the decimal point. So you are not only at an obvious risk for losing the mortgage, but lying on a mortgage application is considered mortgage fraud and it’s actually illegal.

2)Not knowing your credit history

 

It is vitally important to ensure that your credit history is known and understood prior to applying for a loan. Often applications are declined due to small & simple default, such as delay in the credit card payments. Bankers look at the personal credit history (credit cards, mortgage payments and personal bills) to get a sense of track record with financial responsibilities of the customer. This is an extremely important preliminary step. Your ability to qualify for a mortgage, as well as the interest rate you’ll get, is closely aligned with your credit score.

What if you’ve had problems in the past? If you’ve had a default, let your broker know upfront and they can select a lender that is OK with it.

3)Not including all your living expenses before taking a loan

 

Make sure you disclose all credit cards and hidden expenses – or even expenses relating to your kids. When a lender gets your bank statements, they will see all the payments to the even credit card companies, and school fee payments. If a lender were to see this, they would likely decline the loan due to non-disclosure. It’s best to be honest upfront and get an approval that will be honoured.

 

 

4)Employment History

 

Never hide your employment history. Lenders like their borrowers to have a relatively stable recent employment record – at least 18 to 24 months or more in their job and for self employed a continuity of 3 years in business, receiving regular income .If you are looking to change employers at the same time you are looking to buy a property, seriously reconsider. Stay at the same company at least until you have the mortgage.

5)Incomplete Paperwork

 

The paperwork that lenders require can be significant in number , and it is important to get it right: sending in your application without the documentation required by the lender can result in the loan application going back and forth to the lender a number of times without result. At worst, it declines the entire proposal. If you only send in part of the information the bank asks for, you end up getting a conditional approval that has lots of conditions.

This is ultimately the most important thing to keep in mind. Keep track of any and all bank statements and financial papers existing loans and property papers , storing them in a convenient place. You may want to keep a binder with different folders for each category to stay neat and organized, so that you can easily find any information you need.

Using a mortgage broker to handle the paperwork is probably the quickest and simplest way to ensure you get it right first time. But if you’re going  alone, be sure to read the lender’s instructions very carefully several times. And, if you’re putting in a joint application, you’ll need to provide documents for each applicant.

 

6)Not knowing lending criteria

Banks and NBFC work to a wide range of criteria when deciding whether to approve a home loan. They often have restrictions around property sizes, area, construction of the building buildings and other aspects. For example, many lenders put restrictions on the maximum amount they will lend such as different criteria on residential and commercial property, A different rule if you want to buy land for constructing a house. Similarly there  are different criteria’s for income eligibility for salaried and self employed.  Make sure you know the rules before heading out on the hunt– otherwise you could find extra conditions on your loan or your application is declined altogether.

It is always advisable to take a help of a qualified mortgage agent to make your loan process simple.

7)Not shopping around

 

Simply not considering all your options in the first place, Different lenders offer vastly different loan products. Don’t just take the largest loan you can get, either. Don’t be tempted to go with the lender that will lend you the most, as you may quickly find that you are stretched beyond your limits, particularly if interest rate rises.  A good mortgage broker is well experienced in finding the best deals. They know the challenges of the banking industry, and should be able to direct you to lenders which are best suited for your profile and the type of loan you are looking at.  One of the best advantages to using a mortgage broker as they give you the choice of banks and NBFC and they products and offers. This saves a lot of time of the borrower to do the research and shopping for the loan they are looking at.

8)Not getting the right loan structure

 

One of the most notable risk for small business owners is using credit intended for a short period of time for a long-term purchase, or vice versa. “They will use the wrong type of credit product for the wrong type of purpose.” For example, if you buy a piece of machinery with a loan that was intended to fill a short-term need like purchase of raw material , then you risk being saddled with a loan that you can’t get out from under. it’s much wiser to know your desired loan structure and features first, then start shopping around for lenders who will approve the loan structure at a best possible offer.

 

ConclusionNo matter what you do for loan hunting, make sure you speak with your mortgage broker first. Things that you may not consider a big deal could actually make a big difference in settling smoothly. Your word might be your bond, and a lender’s word might be its bond, but nothing is official until it’s in writing. Gone are the days when a handshake and a promise meant a deal was official. Failing to fill out mortgage documentation means there’s no fine print to read and could indicate a scam above anything else. Even when you are finished paying off your Mortgage Loan make sure that you collect your original mortgage property papers, make copies of everything related to your house and store them in a safe location. Treat your house and everything associated with it as an Asset.