Buying a home is one of the greatest and best investments ever. Buying a house is much cheaper as compared to renting one. Starting the building project might be difficult and expensive but there are options, such as a home improvement loan or even a mortgage refinance. Still, in the long run, it is convenient and less expensive as compared to renting. Most people buy homes with loans from the banks and complete the payment after the agreed time. Getting a personal loan after buying a house is not difficult; however, some factors must be put into consideration because they influence whether an individual can borrow money and how much they will be able to access.
1. Credit Score
This is the first thing that banks and other savings Sacco look into before providing you with another loan. An individual’s credit history must be clear, and he or she must be able to pay the loan back. The ability of the borrower to pay back the loan is a crucial factor that the lender looks into. If your income is low and you have a poor credit history, chances of getting access to another loan are minimal, close to zero, and disqualifies an individual entirely from accessing a loan. However, this does not mean that all credit lenders will deny your loan. This is because different lenders have different ways of looking into an individual’s credit history.
2. Spending Power
Usually, lenders will want to see recent bank statements to see how much has been withdrawn from the account for the past six months or even one year. If the home was bought on loan, and you miss repayments, lenders may view this as the inability to pay the loan and deny you the chance of getting another loan.
3. Do not miss any Repayment
The moment that an individual misses repaying a mortgage loan, the lenders will question his payback ability. It is of more significant advantage to continue repaying your mortgage loan because this increases your credit score and gives an individual the chance of applying for a personal loan. As soon as you pay the first six months of the mortgage loan consistently without fail, you can have access to a personal loan.
4. Pay small debts
Most people do not put this into consideration. Still, small debts have a substantial negative impact on an individual’s ability to access another loan. Start off by paying and clearing the small debts and make your lenders trust you with their money.
5. Home Equity
This is also another factor that will determine how much an individual can borrow. Home equity is defined as the amount that an individual owes his or her lender as compared to how much his or her home is worth. Most lending companies have a rule of offering only up to eighty-five percent of an individual’s home value. This is done primarily for those who have not cleared their mortgage loan. Furthermore, the figures can go up depending on whether you will complete the repayment on time. Therefore, getting a personal loan after buying a house will depend on your home equity.
In situations where an individual has bought a house and wants to access another huge loan, he or she uses the title deed of the house as collateral for the new loan. This assures the lender that the borrower will repay the personal loan one way or the other, and failure to repay the loan, the loss will be on the borrower and not the lender. Collateral is like an assurance of repayment and is a binding agreement between the borrower and the lender.
An individual’s income is another factor that is considered before approving a personal loan. For instance, assuming that you have bought the house with a loan and completed paying the loan, your lender will look into the amount that you are receiving after tax and other deductions have been made. Usually, lenders only feel comfortable giving out a loan that they can deduct from the borrower’s monthly income, up to the time the full amount will be settled. Therefore, income determines how soon a person can access another loan.
8. Loan use and Amount
Assuming that you want to use the personal loan to start a business or for travel purposes, your lender will determine if the amount that you need is reasonable. In addition to that, it will be difficult for the lender to deny you a small personal loan, especially if you have completed repaying the mortgage loan. Assuming that you need a personal loan of $100,000, and your mortgage loan was $1,000,000 and had completed repaying the mortgage, your lender will easily grant you the personal loan. This is because the repayment of the mortgage has increased your credit scores and chances of acquiring even higher loan amounts you may check on Fortune Credit.
9. Legal house documents
Buying a house not only requires a title deed but also registered and legal documents, which show that the transfer of homeownership has been made from the original homeowner to the current and new owner. The documents need to be signed by a legal entity, confirming that indeed the whole process is legal. In scenarios where the lender requires all the house documents to be able to process the new loan, you can provide all the necessary documents, proving that you are the house owner, and get access to a personal loan.
10. Feedback from Previous Lenders
Lastly, getting a personal loan will depend on how your previous lenders have rated your credit history. You might have paid the mortgage loan on time, but maybe how you communicated with your previous lenders was rude and unethical. In most countries, when one goes past his or her payment period, their lenders call to inquire about the delayed payment. Other people offer valid reasons while other people become rude to their callers. This gives all your lenders the impression that you are not trustworthy, and you are rude and unlikely to pay on time.