Increasing your chances of getting your housing loan approved is not a layman’s job. After all, regardless of the amount you apply for, there’s no denying the crucial aspect of getting your loan approved once you decide on purchasing a house.
Given that purchasing your dream house is an investment, lenders approve home loan applications only after you meet the eligibility criteria.
To double-check the eligibility criteria and to ensure the loan’s approval, this post shall explain the fundamentals. On this note, here are 7 effective tips that can help borrowers improve their home loan eligibility. You can also calculate your eligibility for taking a home loan with a home loan eligibility calculator.
1. Choosing a Longer Tenure
As you increase the loan tenure, there’s a higher chance of the home loan getting approved. Since longer tenures mean a smaller, more manageable EMI, there’s an increase in the possibility of on-time loan repayment. Loans that have a longer tenure offer additional time to borrowers to repay. In general, it contributes to timely payments as well as reduced risks.
2. Improving Your Credit Score
There’s no denying the fact that your credit or CIBIL score plays a fundamental role in deciding the loan approval and amount. Most home loan lenders require a credit score of above 700, with an excellent repayment history and no defaults. After all, it’s thought to be excellent for the approval of the loan as it makes the borrower risk-free and more creditworthy.
3. Repayment Capacity
Lenders prefer applicants who have sufficient repayment capacity. This means that your monthly EMI as a result of the home loan along with your current monthly EMIs shouldn’t be more than 70% of your monthly salary. By including another source of income, you increase your chances of having the loan approved. If you have a side business in addition to your service at the office, you can show it and augment the chances of getting your loan approved. The second source of income encompasses part-time business, rental income, rent from machinery or equipment, and more. Additional income sources help you receive a higher loan amount while also increasing your credibility in the lender’s eyes.
4. Add A Co-Applicant
If your spouse or family member has a stable income and a great credit score, it will add value to your loan application. It can also result in the bank being more willing to sanction you a higher amount as a loan.
Adding 1 or more co-applicants (not more than 2) helps in reducing your EMI burden, making the loan more affordable. Some lenders consider clubbing the family members’ income. This, too, can result in a lower interest rate.
5. Creating An Account With The Selected Lender
Once you finalise the lender and plan to apply for a loan within a year, you will be able to grow your professional relationship with that lender by opening a bank account with them. If you do that, you will be offered additional preference by your selected lender, especially when applying for the loan in the future.
6. Pre-Pay Existing Loans
When you already have an existing loan under your name, it is imperative to pre-pay it before applying for a new offline or online home loan. If you fail to do so, lenders are more likely to see you as a high-risk customer, thereby reducing your chances of securing a second loan.
7. Considering the Step-up Loans
A set-up loan happens to be a better option for individuals with a lower monthly income. Alternatively, it’s great for those finding it challenging to repay higher loan rates due to other expenses every month. Under such conditions, the respective lenders provide loans at low EMIs during the initial years. The banks gradually increase the EMIs as the borrower becomes more financially secure, thus paying a higher amount every month.
The Bottom Line
Availability of a home loan is a big and tough financial decision for anyone. For this reason, considering the tips mentioned above will help you increase the chance of you being eligible for a higher loan amount at lower interest rates so that you can buy your dream house. If you’re looking for more information about good home loans and want to find a reliable lender with affordable interest rates, you must check out Grihashakti.