A dependent is someone, usually a family member, such as a child, who is financially reliant on another person for support. If your client has dependents, it could impact their home loan.
How does having a dependent impact your client?
Having dependents can affect your client’s borrowing power, but it should not stop them from qualifying. If your client has dependents, their disposable income is lower, which affects their living expenses. Lenders factor living expenses into their calculation of an individual’s borrowing power. While the minimum living expense for large families depends on the lender, they increase with each additional family member living in the home.
How can your client improve their borrowing power?
If your client has a large family, their increased living expense can negatively impact their borrowing power. However, there are some steps they can take to improve their borrowing power.
- Your client can cancel unused credit cards.
- Your client can fix their interest rate for at least three years.
- Your client should make sure that they have updated financial records. Lenders use tax returns, payslips, and account statements when assessing their borrowing power.
- Your client can rent out their property to increase their income.
- Your client should choose a home loan with beneficial features such as a line of credit.
- Your client should save for a sizeable down payment of at least 20% to keep them from paying Lender’s mortgage insurance, saving them thousands of dollars.
- Your client should choose the right lender for them.
If your client has many dependents, you need to help them understand how their borrowing power is affected. Mortgage Street can help your client improve their borrowing power and strengthen their loan application. As a non-bank lender, we can also help them find a home loan that fits their financial situation and offers competitive interest rates.