About 3 months ago, I found myself in a very tight situation. I wanted to buy an item which will help me greatly. Fortunately for me, I was able to come up with about 60 percent of the money needed. However, coming up with the rest of the fund needed began to appear impossible.
All my subsequent incomes were spent on other expenses that are so crucial and could not be ignored. At some point, I began to take the money I had already set aside for this item. If not for the help I got from some people, I would have ended up spending the 60 percent I kept initially.
For a lot of people, buying a house is not so different from this. Some people come up with part of the money needed to buy a house, but coming up with the rest of the fund becomes impossible. To help in situations like this, a good number of people take special loans from banks.
The person comes up with a certain amount of money and request a mortgage from a bank. However, not everyone who requests mortgage from banks is given. In fact, a majority of people are turned down, often owing to simple mistakes they could have avoided.
As a reader of this article, you have probably requested for a mortgage and have been denied, or you have not requested for a mortgage and don’t want to get denied. Whatever your reason for reading this article is, let me inform you that I will share some brilliant things to do to avoid getting a negative response when you request for a mortgage.
Here we go.
- Improve On Your Debt-To-Income Ratio
First and foremost, what is the debt-to-income ratio? The debt-to-income ratio is simply the ratio of the amount of your income you allocate to paying debts, to your total income. Let us take, for instance; you earn N350, 000 on a monthly basis; from the N350, 000 you earn, you allocate N120, 000 to paying debts, this means your debt-to-income ratio is 120, 000 to 350, 000.
Simplifying this, we get a ratio of 12 to 35. At times people of talk of the debt-to-income ratio in terms of percentage. In this case, it is approximately 34.29 percent. When you have a debt-to-income ratio greater than 30 – 35 percent, you should be aware that you are on the red side. To stay on the green side, you should reduce your debt-to-income ratio to 30 percent or less.
Reducing your debt-to-income can be achieved in two ways. It can be achieved either by increasing your income or by decreasing the percentage of your income that is allocated to paying debts. How do you increase your income? That is a question worthy of an independent article on its own.
- Avoid Switching Jobs
Before bank loans money out, there is something they want to be sure about; this person is likely to pay us back with no issues. Unfortunately, not everyone is aware of the fact that something that banks check is your job stability.
Are you the kind of person who frequently jumps from one job to another? If yes, this is a red signal to a bank. Financial institutions will consider this financial instability, and you may end up being bounced back.
When you want to request a mortgage, it is important that you are stable job-wise. Being stable leaves a bank a signal that you seem likely to pay back, and this might help you get the mortgage you want.
- Monitor Your Spending Habit
People have different spending habits. Some people are good at keeping money instead of spending as they wish. On the other hand, some people are really poor at this; these people find it quite impossible to keep money.
Banks are very strict when it comes to spending habits. They will seek to know if a person that requests a mortgage has a good spending habit. If you have a good spending habit, this will not be a factor that will weigh you down from getting your mortgage. However, if you have a poor spending habit, it is very likely that you will be declined.
In conclusion, if you are the type of person who has a poor spending habit, it is time to change for better. Improving your spending habits will increase your chances of being given a mortgage. However, if you already have a good spending habit, now is not the time to relent. You should rather improve if you can
- Diminish Your Debts Or Eliminate Them Completely
When you request a mortgage from a bank, it infers that you want to incur some debt. Before a bank grants people mortgage, they always want to know if you are a debtor or a debt-free person. Banks do frown at debtors, especially big debtors.
When applying for mortgage, make it a priority to reduce the amount of debt on you, or eliminate all your debts if possible. Existing debts send banks no other signal than a red signal. You do not want this, so take meaningful actions against your debts if you have any.
- Cultivate A Good Relationship With The Bank
In a normal day-to-day operation with a bank, the bank will interact with you as an organization. However, when it comes to issues like mortgage, the organization develop some human characteristics.
When it comes to mortgage, a lot of banks give good relationship priority. Banks will be more glad to grant mortgage to someone who has a good relationship with them, compared to another person who has a bad or no relationship with them.
How do you cultivate a good relationship with a bank? It starts by opening an account with the bank if you don’t have one. After that, ensure that you make meaningful use of the account. If possible, make the account your primary account.
All these are just to help increase your chances of being granted a mortgage.