You’ll gain a wide range of benefits by choosing a home improvement loan paid back in installments as opposed to using a credit card. Additionally, you’ll get the benefits of receiving higher loan amounts, longer and better terms, and interest rates that are much more competitive than the credit card interest! Even if you wanted to pay for your renovations with a credit card, many home improvement contractors do not accept them. They need to get paid by check or cash to perform your much-needed restorations.
With that said, we want our readers to be prepared when they begin applying for home renovation loans. So, we’ll provide a checklist that everyone should use to get ready for the loan application process.
While we’re at it, don’t forget to use the internet to your advantage. Use an online comparison tool that will compare numerous home renovation loans based on your specifications.
Getting Ready to Apply for Home Improvement Loans
Before beginning the home loan comparison process, you have to be prepared for the inevitable. You must have all your ducks in a row before you prepare any documentation for potential lenders. Some of the main things lenders look for are as follows:
Income Proof
You’re never going to qualify for a home renovation loan, or any other loan for that matter, if you cannot prove your income. This makes sense because financial institutions are only going to loan money to people they know can pay it back over time based on the terms of the loan. Even though lenders loosened their qualifications prior to the housing market crash in the mid-2000s, they’ve since tightened their criteria and now thoroughly scrutinize every potential borrower and look at their financial history, employment history, and more under a microscope.
It’s relatively easy to prove your income. Just provide potential lenders with copies of your pay stubs, any investment income you may have, or other paperwork regarding income you generate throughout the year. By having this information gathered and prepared ahead of time, you’ll be able to immediately provide documentation proving how much money you make.
Lower Your Debt to Income Ratio
If your debt to income ratio is high, you’ll have a difficult time getting financial institutions to lend you money. If you have $2000 worth of expenses every month and currently owe $20,000 worth of credit cards and you only make $25,000 a year, lenders will not provide you with a renovation loan.
In this scenario, you’d have to significantly pay down your credit card debt before any lender considers giving you a home improvement loan. So keep your debt to income ratio in mind, lower it when necessary, and you’ll have a much better chance of qualifying for a low interest loan.
How’s Your Credit Score?
Finally, lenders are going to look long and hard at your current credit score. If it’s low because you’ve been late with payments or stopped paying certain bills altogether, you will not appear to be a safe bet to lending institutions. So do everything you can to clean up your credit report and raise your credit score. Otherwise you’ll have a tough time getting a home improvement loan.
Conclusion
Please pay close attention to these guidelines when applying for home improvement loans. Work on fixing your credit and debt to income ratio to have a better chance at qualifying for financing. You’ll have your dream kitchen in no time.
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.