Tips to Increase Home Loan Eligibility
Buying your dream home is a milestone achievement for many of us. However, with the rising cost of real estate, it’s not always easy to finance the purchase on your own. This is where applying for a home loan comes in handy! But before you get too excited and start house hunting, it’s important to know whether or not you’re eligible for a loan. In this blog post, we’ll be discussing what home loan eligibility means and provide some tips on how to increase it so that you can secure the funding needed to make homeownership a reality!
What is Home loan eligibility?
The loan amount you will receive to own a home and whether you qualify for a loan are referred to as home loan eligibility criteria. When determining your home loan eligibility, your age, income, job type and assets, credit score, and a variety of other factors will all be considered.
Also read: Top home loans in India
7 Ways to Increase Your Home Loan Eligibility
To determine a borrower’s eligibility for a home loan, banks go through a meticulous process. The bank or lender determines the eligible maximum amount and interest rates based on the applicant’s profile, which includes their income, type of employment, credit score, and other factors. You can increase your eligibility for instant approval of your house loan by enforcing the following tips:
Select an Extended Home Loan Term
A Home Loan with a longer term can be used to increase home loan eligibility. Although a longer-term home loan lowers your EMI, it increases the total interest payable on your home loan. As a result, if you choose a long payback period, you must account for a higher borrowing cost.
Make an effort to secure a larger down payment.
A banking firm or lender will finance a House Loan between 75% and 90% of the appraised value of the home. Even so, you may be liable for the remaining balance. Low down payments lead to higher loan values and, as a result, higher interest payments. As a result, making a larger down payment is always recommended to avoid paying higher home loan interest rates.
Repay all outstanding debts and loans
For financial institutions to determine a Home Loan applicant’s eligibility, the debt-to-income ratio is critical. As a result, it makes sense for a candidate to pay off all debt because doing so will increase their eligibility for a Home Loan. They will also need to imp
Consider obtaining a joint home loan.
If your family has multiple income earners, applying for housing loans jointly significantly increases your chances of being approved for more loans.
The best course of action would be to apply for a home loan with your partner, parents, or both. Co-borrowing has several advantages, including increased home loan eligibility, shared repayment responsibility, and tax advantages. If you have a co-borrower with good credit, your EMI becomes more manageable, increasing your eligibility for a Home Loan.
Ensure that your credit score has improved.
A high credit score increases your chances of getting a home loan. To do so, however, one must ensure that all loan repayments are made on time.
While on the one hand, being on time with your credit card payments and monthly instalments (EMIs) will help your credit score, any delay or fallback will hurt your credit score. When you apply for a Home Loan, the bank will typically check your credit score to determine your creditworthiness.
Credit bureau scores are used by banks and other financial institutions. There is no minimum score required for Home Loans, but a score of 750 or higher is usually considered favourable for loan approval. Another advantage of having a good CIBIL score is lower interest rates on home loans.
Declare any additional sources of income.
Your Home Loan eligibility improves when you disclose your various income sources. As a result, you should consider adding another source of income to help you secure a larger loan amount. Rental income, a side business, and so on are examples of additional sources of income.
Avoid Frequent Job Changes
You must have two years of continuous employment with the same company. If you are a salaried individual planning to apply for a home loan. Job changes on a regular basis have an impact on the amount of eligibility for Home Loans. As a result, planning should begin as soon as possible so that you can demonstrate two years of uninterrupted service to an organisation.
The bottom line
When you follow the tips above to improve your chances of getting a home loan, you can easily qualify for a larger loan amount. A longer repayment period, and better terms and conditions.
Begin by improving your credit scores and, if necessary, correcting any errors. Then, keep your debt-to-income ratio low while actively saving for a down payment on your dream home.
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Also read: 6 reasons for personal loan rejection