How Can you Increase your Home Loan Eligibility? Know Here
In the present times, buying a home has become an aspiration for many. Moreover, with real estate prices constantly on the rise, it makes sense to invest in a property, whether for investment or residential purposes. However, you might be wondering about the different home loan schemes offered by lending institutions and how you can become eligible for the same. When it comes to home loan eligibility, some criteria determine and increase your chances of securing a home loan. However, even if you don’t meet all the requirements, you can adopt specific measures to increase your eligibility. So, before you go about applying for a home loan online, let’s look at the factors determining home loan eligibility.
Factors Affecting Home Loan Eligibility
Your annual income justifies the overall loan amount that can be sanctioned. Some lending institutions provide extra incentives such as EMI forgiveness, repayment flexibility, cheap interest on loan top-ups, etc. Your salary and income are critical factors in determining whether or not you are eligible for a house loan.
2. Employment Status
Your work position is also a significant consideration. If you work for a multinational corporation (MNC), a private or public firm, you have a better chance of getting a favorable home loan. Even if you are self-employed and have a reliable business, the lender will provide you with a loan with flexible repayment terms based on your earnings. Conversely, a person with an unsteady business or career has a lower likelihood of qualifying for a house loan.
3. Credit Score
If you have a credit score of 700 or higher that will put you in a better position to be eligible for a home loan. Your credit score directly influences the terms of the loan offered, including the interest rate. Repayment history, the number of current loans and credit card dues, the type of debt serviced in the past, and the number of payment defaults are all factors that go into your credit score. The score helps the lender determine your financial trustworthiness and creditworthiness and your ability to repay the principal and interest.
The lender will calculate your repayment plan based on the number of years you have remaining as a salaried or professional worker. Taking up a house loan years before retirement, especially during your early work years, ensures a smooth approval procedure and provides you with a more significant value and lower interest rate.
How to Increase Home Loan Eligibility
1. Opt for Longer Tenure
When you extend the loan term, your home loan eligibility improves since the lender will see that you have more time to repay the loan. As a result, the likelihood of timely loan payback rises. Longer-term loans allow the borrower more time to repay the loan.
2. Add a co-applicant
You can improve your home loan eligibility by adding a co-applicant, an earning family member with a good credit score. As a result, the maximum amount you may borrow will grow as your EMI affordability improves.
3. Choose the Right Lender
Choosing the right lender is important as a loan is usually a long-term commitment. Check and review the prospective lenders for their trustworthiness, interest rates, and more. Take time out of your busy schedule to interact with the customer care executive to develop a better understanding of the lender and their policies.
4. Keep Your FOIR Low
The Fixed Obligation to Income Ratio (FOIR) is a significant metric for assessing home loan eligibility. It is the ratio of your obligations to your income. Most financial institutions estimate that you will spend half of your income on living expenditures. Therefore, when applying for a house loan, you should strive to keep your FOIR below 40% to maximize your chances of securing a home loan.
5. Credit Score
The CIBIL score, often known as a credit score, is crucial in determining loan acceptance and amount. A credit score above 700 is regarded as suitable, and it indicates to the lender that you are a creditworthy and risk-free borrower. In addition, low home loan interest rates are available when you have an excellent CIBIL score.
6. Clear Your Debt Obligation
Lending organizations use the debt-to-income ratio to determine if a borrower is eligible for a house loan. As a result, it makes sense for an applicant to pay off all of their debts, as this will improve their home loan eligibility. In addition, they should improve their credit score by paying off any outstanding bills.
7. Try to Put Down a Higher Down Payment
A house loan is typically funded by a financial institution or a lender for upto a maximum of 90% of the property value. The remaining amount has to be furnished by the applicant as the down payment. The lower the down payment, the larger the loan value and, as a result, the higher would be the eligibility requirement. Paying a higher percentage as a downpayment would go a long way to improving your eligibility for the home loan.
Now that you are aware of how to qualify and improve your home loan eligibility, you can start applying for a home loan. Compare the interest rate offered by various lending institutions. You can get started with your home loan application with just a few steps.