Things You Want to Avoid When Applying for a Home Loan

At some point in your life, you’ll think about getting a home for yourself. It could happen when you’ve got a family of your own, or when you just want to strike out from family and start living alone. Some young adults prefer living in condos and apartments that let them stay closer to their workplaces or areas with a high social capacity.

Some will prefer houses that allow them the freedom of space and extra room to breathe. Buying a home isn’t a joke, and it’s a cost that you need to be prepared for. It’s one of the biggest decisions you can make, and where raw buying power can fail you, a home loan can help bridge the gap.

The time and effort and research you put into finding the right home loan might still be for nothing if you’re rejected. The reasons you may get rejected when applying for a home loan are rooted in your finances, so here are a few things you might want to avoid.

What to avoid

That elusive dream home comes with a hefty price tag, so you decide it might be a good idea to take out a home loan to help finance it. Approval for home loans may be easier these days, and come with other benefits, but you can still rejected.

When applying for a home loan, it is a good idea to look at your financial capabilities. If you’ve just started at your current job, it’ll be better to wait until you’ve gotten at least a year or two under your belt before applying for a home loan.

You’ll also want to avoid falling further into debt. If you’re thinking about getting a loan, it’s a good idea to not have any existing credit card debt, or applying for a new credit card – even if it’s with the bank you’ve engaged for your loan.

Big purchases that increase your debt to income ratio are also something you’ll want to avoid, as banks look at your financial records and capacity to pay back the loan you take out – no matter how small. To cut to the chase, getting a home loan means cutting back on every unnecessary expense you’ve got and making sure your financial house is in complete order.

The income to debt ratio

This is one of the key determining factors used by banks to figure out whether or not you’re financially capable of taking on the burden of a home loan. Big ticket item purchases like cars, expensive entertainment systems, or even plane tickets can suggest a large amount of debt. At the sight of that, banks may be less inclined to allow your loan application to go through.

Betting the bank

Another thing that banks will look for is whether or not you have any cash reserves. You may have stashed away funds that are specifically for use for your new home, and you might also have plans to spend it on furniture and other things for the house you’ve longed to buy. Sudden depletion of this may spell doom for your home loan before it’s even approved. It will be best to keep that cash reserve topped up until your home loan is completely approved – and even then, it might be better to use that money to make paying off your home loan easier.

Final thoughts

If you’re looking into buying a home, having your finances in order is necessary. It also won’t help if you’re thinking about buying a home that you cannot afford even with the loan. When it comes to buying a home, think about what you can afford without breaking the bank completely – as the expression goes.

Temper your expectations, explore all possible options when it comes to financing the purchase of a home, and compare all possible legitimate home loan packages available to you.


Kyle Kam
Kyle Kam
Kyle Kam is our guest contributor from, a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.