Finding a new home is an exciting experience for all. Whether the process is overwhelming or pleasant simply rests on getting things in order to ensure a smooth transition. One of the main steps in that process is being aware of the factors which makes you eligible for a home loan.
Your income and the pay back capacity are central to making you eligible for availing a home loan. Basic criteria which leading financial institutions look for are:
Repayment ability: Your income should be sufficient enough to cover the monthly payments of mortgage and should also cover your other monthly expenses. Financial institutions use debt-to-income ratio (DTI) to figure if you qualify. The thumb rule is, DTI to be 36% or less.
Likelihood of loan repayment: The underwriter in charge looks into your credit score history and your payment history and arrive at your likelihood of payments in the future. It always pays to have a good credit score.
Value of the house: The lender, based on professional appraisal, looks at the value of the house you are intending to buy and checks if it meets or exceeds the purchase price. They check if this fits in their loan-to-value (LTV) guideline. Most institutions prefer to have this ratio be 80-95%. Note that higher the value of the house and lesser the loan amount, your LTV ratio is less.
Down payment: The source and the amount of money allocated for down payment is an important eligibility criteria. If the down payment amount is lesser than 20%, the financial institution might need you to take take up private mortgage insurance (PMI), you might also be required to set aside a few month’s repayment as reserve payments. These reserve payments are in case of emergencies or unforeseen events. Qualifying for PMI increases your monthly mortgage amount.
Your home loan’s approval rests on having healthy credit history, sufficient income and repayment ability and a comfortable down payment amount. External factors like the value of the house also pays a role in getting your home loan approved.
You can enhance your home loan eligibility by adding an earning member as a co-applicant, availing a structured repayment plan, ensuring a steady income flow, regular savings and investment, repaying ongoing loans and short term debts, furnishing details of your additional income sources, keeping a record of your variable salary component and taking actions to rectify errors (if any) on your credit score.
There are companies that work on collecting and maintaining credit information of consumers. These are known as credit reporting agencies (CRAs). There are three such major CRAs in the country, namely Equifax, Experian, and TransUnion. Apart from these, there are other smaller-scale agencies too that specialize at the job. If you’re worried about “where to get my credit score?,” the larger CRAs are the most reliable bets.
These major CRAs obtain information from companies that you hold business and transactions with. People or companies that lend you money regularly report to these CRAs on your repaying status. There is also detailed information on the amount you are indebted and whether you have ever defaulted on your payments. Aside from the reports obtained from lenders, these companies also tally your general records based on certain other aspects. Some of these aspects are your public records from the local and state judiciary. These include your tax records and bankruptcy information. This information makes up an important chunk of your credit score and its report.
Equifax
Present in 24 countries, Equifax is an agency that offers consumers protection against identity theft and credit fraudulence. They also sell credit reports and credit monitoring assistance to businesses.
Experian
Experian started off in London and is now a trusted agency in 39 different countries. It provides you with a credit score, credit report, and even credit tracker on subscription. The agency uses FICO 8 system of credit score calculation. Experian was a part of Forbes’ “World’s Most Innovative Companies” in 2018.
TransUnion
Based across 30 countries with a database of over 1 billion consumers, TransUnion is another CRA giant. The agency, like the other ones, will provide you with your credit score and your credit reports. In case you decide to freeze your TransUnion credit report, it will also go the extra mile to notify Equifax and Experian, which frankly is a big help especially in case of identity theft and credit fraud.
So, the next time you are sat wondering “where to get my credit score?,” think of these three giants that provide you with an annual credit score and credit report for free once each year. However, if you are looking for more frequent updates, you can subscribe to their services and receive your monthly updates.
Did you know that you have more than a single credit score? Agencies calculate your credit score based on the data in your credit reports. If you are wondering, “where to get my credit score?,” there are three main credit reporting agencies. These can have different credit scores for you if your information on each of their credit reports is different. Also, these agencies charge a fee to reveal your credit score.
Recently, it has become easier to track and get hold of your credit score without paying any fees. You can get it from your credit card company, your loan provider, and even from a non-profit counselor. Here are a few tips you can use to check your score.