Buying a house is stressful enough without worrying about whether or not you’ll be approved for the loan. Unfortunately, one of the most critical factors in that decision is how much debt you have. Fortunately, there are several ways to decrease the chances of being denied an acquisition loan and increase your chances of getting approved.
Increase your income.
The best way to increase your income is to get a raise. If you’re already working for someone else, this can be as simple as asking your boss for one. If that doesn’t work, try applying for jobs at other companies–you might find opportunities elsewhere that pay more than what you’re currently making and offer other benefits like better hours or health insurance coverage.
If getting a raise isn’t possible and starting over somewhere else isn’t an option (or if both seem too daunting), then consider starting a side business or small business instead of increasing profits at the company where you currently work.
Repay all credit card balances.
The first thing you should do is pay off all of your credit card balances. This frees up cash flow and can improve your credit score, which will help you get approved for an acquisition term loan.
Pay off your debt.
The first thing you should do is pay off all of your debts. If you have credit card bills, student loans and car loans, pay them off as soon as possible.
This will lower the amount of money that goes to interest each month and give lenders a better idea of what kind of financial situation they’re getting themselves into if they provide an acquisition term loan for your business.
Lower your debt-to-income ratio.
If the lender sees that your debt-to-income ratio is too high, they may deny your application for an acquisition term loan. The debt-to-income ratio is the amount of money you owe to creditors compared to your monthly income.
If this ratio is higher than 45%, it could indicate that you have so many expenses and debts that it would be difficult for you to make payments on a new home (or any other large purchase).
Improve your credit score.
The credit score you have when you apply for a loan is the most important factor in deciding whether or not you’ll be approved. You can increase your chances of getting approved by improving your credit score, which is calculated based on several factors, including:
- Payment history (how often and on time)
- Debt-to-income ratio (how much debt versus how much income)
- Credit card balances
Decrease the number of credit applications you’ve made.
- Decrease the number of credit applications you’ve made.
- Credit applications can lower your credit score by a small amount, but if you apply for many loans over a short period, it could cause more significant damage to your score. Only apply for a loan if you need one (and make sure you can afford the monthly payments).
- Credit inquiries are only used to determine how much money an individual borrower can borrow from lenders rather than how much money they can afford on their own.
Experts from Lantern by SoFi comment, “Taking out a business acquisition loan allows a borrower to finance the purchase of an existing business.”
If you’re looking to buy a home, it’s important to know your options and find the right lender for your needs. Whether you’re buying an existing property or building from scratch, we can help you find financing that works best for you and your family.