Home affordability has increased sharply over the last few years with easier availability of Home Loans with simpler eligibility conditions. So, those planning to buy a house get as much of a loan as they want without hassle. While some opt to take a Loan Against Property to fund a new home purchase with high eligibility, others find ways to crack eligibility for Home Loans.
Loan companies analyze applicants’ loan eligibility based on factors like loan terms, loan amount, income, credit score, and repayment capacity. Let’s explore a few successful ways to enhance loan eligibility and own a dream home.
Opt for a Longer Repayment Tenure
Choosing a longer repayment tenure is an effective way to boost housing loan eligibility. Since it reduces the monthly EMI amount, it increases the chances of timely repayment without stressing the borrower’s finances. However, remember that although a longer term lowers the EMI amount, it increases the total loan interest payable.
Make a Bigger Down Payment
A lending firm finances Home Loans between 75-90% of the property’s appraised value. The borrower must pay the remaining balance from their pockets as a down payment. Lower down payments mean higher loan amounts, consequently increasing the interest payments. So, save money to make a bigger down payment. As a result, the applicant will need to apply for a smaller loan amount, reducing the lender’s risk and improving the applicant’s eligibility.
Pay Off Outstanding Loans and Debts
The DTI (debt-to-income) ratio is crucial for lending institutions to assess an applicant’s eligibility. So, paying off all loans and debts before applying for a Home Loan makes great sense. Besides increasing their Home Loan eligibility, it will also make repayment more manageable for the applicants. In addition, they will also raise their credit scores to improve eligibility and get lowest home loan interest rate and better loan terms.
Keep Documents in Order
Home Loan applicants must provide several documents to support their application. These include the identity, address, and income proofs, including form 16, ITR, and property documents with sanction map. Find the list of documents for Home Loan on the lender’s website and keep them in order before applying.
Opt for a Joint Loan
If a family has multiple earning members, opting for a joint housing loan dramatically increases their eligibility. The best course of action would be submitting a Home Loan application with parents, spouse, or both. Co-borrowing a Home Loan increases loan eligibility, shares the responsibility of repayment, and attracts bigger tax advantages. The loan EMIs become more manageable if the co-borrower has good credit scores and a high income. Since lending companies see less risk in sanctioning loans to joint applicants, they feel more confident lending to them at better terms.
Read: Income Tax Benefit On Home Loan For Under-construction Property
Apply with a High Credit Score
A high credit score of 650 or above significantly increases Home Loan eligibility. However, one must ensure paying all EMIs and credit card bills on time to achieve that. Being punctual with all due payments will positively affect the credit score. On the other hand, delaying or falling back on them eventually reduces it. Lending institutions typically check the applicant’s credit score while evaluating their creditworthiness. A lower interest rate is another benefit available to applicants with a decent credit score.
Proclaim All Additional Income Sources
Disclosing all additional income sources increases loan eligibility significantly. So, add all income sources besides your regular income, including side business, rental income, and income from investments.
Avoid Job Switches
Salaried individuals planning to apply for a housing loan must have at least a few years of experience in the same company and industry. Frequent job changes indicate income instability and reduce loan eligibility. So, start preparing for the loan application as early as possible and demonstrate regular service term to the lender to ensure eligibility. Those who follow the above suggestions increase their chances of getting Home Loan approval quickly.
They qualify for a bigger loan amount, extended repayment periods, and more favorable loan terms and conditions. Begin by reviewing the credit report, correcting errors, and raising the credit score. Then, reduce the DTI ratio and save for a bigger down payment for your dream house. If the circumstances don’t favour your application, opt for a Loan Against Property to get a secured loan with excellent terms.