How To Avoid Being Denied Your Mortgage In Ghana
Imagine finding your dream home, you can see yourself and your family living there for years to come. The only problem is that you need to get a mortgage to make the purchase. You fill out the application and wait with bated breath for an answer from the bank. But then, you receive the news that your mortgage has been denied.
It’s a crushing feeling, but you’re not alone. It is much more common these days for people to be denied a mortgage. Times are hard and banks are stricter with their lending criteria. However, there are ways to avoid being denied a mortgage. Here are the top 6 tips:
1. Save up for a larger down payment.
A larger down payment shows that you are a low-risk investment for the bank. It also gives you some equity in your home from the start, which is always a good thing. Saving up for a larger down payment is one of the best ways to avoid being denied your mortgage. By showing the bank that you have skin in the game, you are more likely to get approved. It factors into your borrower profile in a big way.
Lenders look at the loan-to-value ratio when considering a mortgage application. This is the ratio of the loan amount to the value of the property. The higher the down payment, the lower this ratio will be. A lower loan-to-value ratio is seen as less risky by banks and is more likely to get approved.
If you are able to make a large down payment, it is always a good idea to do so. But, if you can’t, don’t despair. There are other things you can do to improve your chances of getting approved.
2. Improve Your Debt to Income Ratio
When filling out the mortgage application form, there is a portion that asks for information about any creditor payments you have and your monthly income. This is used to calculate your debt-to-income ratio. Debt-to-income ratio is the percentage of your monthly income that goes towards paying debts. The lower this number is, the better it is for your application.
Your debt to income ratio is one of the most important factors in getting approved. Banks want to see that you have enough income to cover the mortgage payments as well as your other debts. They use this number to determine if you are a high-risk investment or not.
A good debt to income ratio is anything below 36%. If yours is higher than that, there are things you can do to improve it. One way is to simply make more money. This is not always possible, but if it is, it will help your application in a big way. Another way to improve your debt-to-income ratio is to pay off some of your debts. This will reduce the amount of monthly income that goes towards debt payments and improve your chances of getting approved.
Whatever you do, make sure you are honest about your debt to income ratio on the application form. If the bank finds out you lied, it will automatically deny your mortgage.
3. High Credit Score
Your credit score is another important factor in getting approved for a mortgage. A high credit score shows that you are a responsible borrower and have a good history of making payments on time. It also shows that you are unlikely to default on the loan. This is why a high credit score is so important in getting approved for a mortgage.
There are a few things you can do to improve your credit score. One is to make sure you always make your payments on time. This includes things like credit card bills, car payments, and any other debts you have.
Another thing you can do is to take time to review your credit report and check for errors. If you find any, dispute them with the credit bureau. This can help improve your credit score.
Lastly, don’t open any new lines of credit before applying for a mortgage. This can actually lower your credit score and make it harder to get approved. A high credit score is one of the best things you can have when applying for a mortgage.
4. Stable And Verifiable Income Source
When applying for a mortgage, the bank will want to see that you have a stable and verifiable income source. This is because they want to make sure you will be able to make the monthly payments on time. Employment history is very key here. They will want to see that you have been employed for at least two years, preferably with the same employer.
If you are self-employed, it is a good idea to have your tax returns from the past two years ready to show the bank. This will help verify your income and improve your chances of getting approved.
Banks want to see that you have a stable income because it shows them you are less likely to default on the loan. If you can show them that you have a steady job and an income that is unlikely to change, it will go a long way in getting your mortgage approved.
5. Property Should Be In Good Condition
The property you are buying should be in good condition. This is because the bank will want to make sure the property is worth the amount of money you are borrowing. They will also want to make sure there are no major repairs that need to be made.
If the property is in good condition, it will increase your chances of getting approved for the mortgage. The bank will feel more confident lending you the money, and you will have a better chance of getting a lower interest rate. Lenders wouldn’t want to finance a property that is unsafe and structurally unsound. This needs to be corrected before the lender’s underwriter will sign off on the loan.
It is important to remember that the condition of the property is not just about the physical state of the property. It also includes things like zoning and whether or not there are any liens on the property.
If you are buying a fixer-upper, it is important to be realistic about the repairs that need to be made. The bank will not finance the full purchase price of the property if there are major repairs that need to be made. You will need to have a down payment that covers the cost of the repairs. You will also need to get an estimate of the repairs that need to be made and include it in your application.
The bottom line is that you have a better chance of getting approved for a mortgage if the property is in good condition. This is why it is so important to do your research and be realistic about the property you are buying.
6. No Last Minute Mistakes
When you are applying for a mortgage, it is important to avoid any last-minute mistakes. This includes things like changing jobs or opening new lines of credit.
These things can make the bank feel like you are a riskier borrower and they may be less likely to approve your loan. It is important to stay stable during the mortgage process and avoid any changes that could make you look like a riskier borrower.
So those are some tips to help you avoid being denied your mortgage. The mortgage process is complicated and there are many factors that go into getting approved. Keep these tips in mind when preparing your application, and you’ll be well on your way to securing the financing you need.
