10 Tips to Increase Home Loan Eligibility

10 Tips to Increase Home Loan Eligibility

Purchasing a home is one of life's most incredible milestones. Before a buyer can feel at ease, extensive preparation, thoughtful organization, and careful verification are required. Regardless of whether you can afford a house with your money, it would be best if you considered taking out a home loan to spread the cost over a few years. Then comes the nerve-wracking task of analyzing each bank's home loan and selecting the best one. 

In the middle of all of this, it's also critical to make sure you maximize your house loan eligibility or qualify for the largest amount of home loan available. Banks can generally lend up to 80% of the property's cost, depending on the borrower's qualifications. 

The following are the top 10 suggestions for improving your home loan eligibility:

• Debt-to-Income Ratio 

The debt-to-income ratio is a measure of how much debt a person has compared to how much income they earn.

Not only does having a strong income matter, but so does your debt-to-income ratio. If you earn Rs.1 lakh per month and your debt payback obligations exceed Rs.80,000, you would not be eligible for a new loan since you would need the remaining income to cover your household needs. 

As a result, regardless of your salary, you must maintain a low debt-to-income ratio so that lenders believe you have quite enough cash on hand each month to make your payments and take care of your family's needs.

• Increase your CIBIL rating

The CIBIL Score is a number that reflects how likely you are to settle your bills on time based on your credit record. If your credit score is above 750, it means you have a strong credit history and are probably able to pay off your debts on schedule. 

If your score is poor, though, you have a good chance of not being able to repay your debts. Banks consider money safety to be just as vital as interest rates; thus, they are hesitant to give greater loans to persons with low CIBIL Scores. 

As a result, maintaining a high credit score is recommended for everyone. The following steps will help you improve your credit score: 

• Always settle your credit card debts and EMIs on time and the whole, on or before the given deadline. 
• Applying for too many lending products at once can result in a new credit score review, which will damage your rating. 
• Maintain your credit utilisation ratio modest, at 25-30% of your credit limit
• Examine your credit report for any errors

Your credit score may be lowered as a result of negative information on your credit report. But what if the statement is inaccurate? It's believed that 20% of credit reports include inaccuracies, so detecting and fixing one on yours might help you boost your rating and increase your chances of getting a loan. 

Each one of the major credit reporting agencies is required to provide you with a free copy of your credit report once a year, so delve deeper into the information they have on record for you and double-check it.

• Getting a down payment prepared 

You must first prepare for the down payment amount before applying for a house loan. According to financial advisors, saving for a down payment might be simple if you approach it as a financial objective. Once you've decided to save money, you should concentrate on the goal, the duration of time you have, and your risk profile.  

If you have more than five years, Investing in equities mutual funds or aggressive hybrid funds is a good option. Adhere to fixed income choices like fixed deposits, recurring deposits, and corporate bonds for shorter durations. When calculating the down payment, keep in mind the rate of inflation for the next four to five years, as well as stamp duty and registration charges.

• Choose a loan with a longer repayment period

The loan term determines your EMI; therefore, extending the loan term may raise your loan eligibility.  

So, if you were going to take a 10-year loan and your credit eligibility was Rs 20 lacs, it's possible that if you're willing to take a 20-year loan, your borrowing ability will increase to Rs 30 lacs. That's all there is to it. This is due to the fact that you agree to pay over a longer period of time. 

• Clear Off Previous Debts 

Lenders would presume that you might not have the willpower or finances to pay off your loan and that you won't be capable of paying all of your EMIs if your outstanding debt is large. 

Clearing off existing debt, such as unsecured loans and credit card bills, may also improve your chances because more of your earnings will be available to pay the new EMI. Clearing past debt establishes your credibility with your lender and helps secure a house loan quicker.

• Increase your earnings 

Your income also determines your potential to acquire a home loan. Banks will consider your income and age if you are a paid employee. This implies that the loan eligibility will be determined by the applicant's earnings and the duration of years of employment.  

The younger you are, the more likely you are to qualify for a home loan. The lender will always check your repayment abilities and work tenure (It should be more than one year). Your career is crucial when applying for a house loan since certain banks refuse to lend to certain businesses and professions.

• Include any bonuses you may be entitled to

You also should inform the banks if you receive any extra bonuses or incentives from your employer or if you have any other sources of income outside of your regular income, such as real estate investment, interest on deposits, or additional business revenue. 

Even if you explain that your father makes some extra money that can be saved for a rainy day, it could be helpful. Although this point will not raise your loan eligibility, this could assist you in getting your loan authorised.

• Account for the fact of step-up loans

Step up loans are a useful method to improve eligibility for people in occupations where they may struggle at first but have a strong chance of earning more as they establish themselves, such as healthcare or chartered accounting. Banks use this technique to give loans with cheaper EMIs in the beginning and progressively increase the EMI as you repay the debt.

• Bank-employer offers 

Banks frequently form partnerships with substantial multinational firms, offering their employees extra incentives in exchange for a house loan. Lower loan interest rates, the elimination of the processing charge, and other incentives might be offered. It's a good idea to check with your banker to see if any such deals are available.

Conclusion

Obtaining a home loan has become more difficult due to tighter financing rules. The excellent thing is that you can do things to boost your probability of gaining a loan, particularly if you start young.  

Begin by reviewing your credit record and correcting any errors, then focus on raising your credit score, decreasing your debt-to-income ratio, and effectively preparing for your down payment are just some of the examples.

Also read about: Important Points to be Consider for Home Loan