For most of us, getting a home is a dream come true. Everyone dreams of having their own house someday. But with rising property rates, owning an estate is becoming tougher. A home loan is a wonderful instrument that allows individuals, especially those with low incomes, to own a home. But here’s the twist: You can only get a home loan if you are eligible for one.
Financial institutions like banks or independent lenders have specific criteria for giving loans. These criteria help them determine the creditworthiness of the candidate. So how can you improve your home loan eligibility? That’s what we are going to explore today. Below, we have shared the top tips to boost home loan eligibility.
#1 Improve your credit score
Banks usually check an individual’s credit score during the home loan evaluation process to evaluate their creditworthiness. You will not be denied a home loan if you have a good credit score. It boosts your home loan eligibility. To improve your credit score, you need to pay all your loan EMIs on time. If you are paying your monthly instalments and credit card dues on time, your seriousness will reflect on your CIBIL score.
#2 Go for home loans with a longer tenure
An important factor that has a direct connection with your EMI amount is your home loan’s duration. Generally, the longer your loan’s duration, the lower the EMI amount. With a lower EMI amount, it would be easier for you to repay the home loan on time. Lenders generally consider this probability when evaluating home loan eligibility. Therefore, try to apply for longer-term loans to boost your eligibility.
#3 Opt for joint home loans
Instead of regular home loans, consider applying for home loans jointly. Having more than one earning member in your family increases your home loan eligibility considerably. When you co-borrow, it not only improves your loan eligibility but the burden of EMI repayment is also divided, with additional tax benefits. If you are sure about home loans, apply for them with your parents or spouse.
#4 Maintain your FOIR below 40%
Your Fixed Obligation to Income Ratio is a critical parameter that almost all lenders consider while calculating borrowers’ home loan eligibility. Most financial institutions require you to have 40%–50% of your monthly income devoted to living expenses. Ideally, if your house expenses match this requirement, the chances of home loan eligibility greatly improve.
#5 Choose the right lender
Lenders are the backbone of the overall lending process. Home loans from banks are something you might not be interested in due to the complex eligibility process.
That’s when independent lenders come in to fulfil your dream of getting a home. There are a plethora of lenders in the micromarket with less complex home loan eligibility criteria. A little research and you’ll be able to find them.
#6 Make patience your friend
It’s advised that you not hurry or panic when applying for home loans. Understand the market rather than rushing into any decision. Here are some things you need to give proper attention to determining your estimated budget, calculating your income or earnings, and checking for errors in the CIBIL report. Spending time researching the market and evaluating lenders will help you get loans even with low home loan eligibility.
#7 Pay off all your debts
Your debt-to-income ratio is an essential factor that most lending institutions consider when evaluating the eligibility of applicants. The debt-to-income ratio refers to the total debt you pay on your income every month. If you are already covering some financially heavy bills, your home loan eligibility rate will be low. The best way to ensure you remain eligible for a home loan is to pay off your debts. When you have no debt or low EMIs, your chances of getting a home loan improve greatly.
#8 Mention additional income sources
An excellent way to increase your chances of getting your loan approved is by declaring your additional income. Lenders base their lending decisions primarily on income. So, when you declare your additional sources of income, you give lenders surety that you can quickly repay them. Additional income sources, such as rental income, side businesses, freelance income, etc., can help you improve your financial health. Besides, having additional income can also help you get larger loans comfortably.
#9 Make a larger down payment
Most lenders or financial institutions finance home loans for approximately 75%–90% of your property’s value. You have to bear the cost of your remaining property. That can be adjusted by someone, but what about the principal value? If you don’t get it in the first place, your overall goal of getting the house will remain a dream. To ensure higher chances of loan approval, try to make a larger down payment. The higher the down payment, the lower the loan value and, therefore, the lower the payable interest.
#10 Avoid changing jobs
Are you a salaried person trying to get a home loan? If yes, then make sure your job profile reflects your current experience of not less than 2 years with the same company. Having frequent job changes in your application will hurt lenders. When it comes to salaried applicants, most lenders accept applications when the applicant’s income is stable. In other words, you have to show the lenders that you have a stable income, and having multiple job experiences contradicts that. Therefore, we suggest you show consistent work experience in your application. It will improve your home loan eligibility and, thus, your chances of getting a home loan.
Home loan eligibility is an integral factor that determines whether you will get a loan or not. To increase your chances of getting a loan, you need to work on improving your eligibility. In today’s blog, you learned the top 10 tips you can follow to boost home loan eligibility. Try them before applying for a home loan, and boost your chances of getting it!
Piramal Finance is a renowned finance company. You can choose from various financing options, such as home loans. They offer hassle-free, quick, and easy home loans with no foreclosure charges and zero repayments. So, what are you waiting for? For more details about their home loan process, visit their official website now!