Do you know where your chances of receiving a Home Loan stand right now? Unfortunately, not every homebuyer knows the chances of approval, especially before applying for a Home Loan.
Receiving credit or having a loan approved is tedious because it requires extensive research and a thorough comprehension of the loan. As a result, it is strongly advised to check eligibility for a Home Loan.
One of the most critical steps in the Home Loan process is to confirm the loan limit. Borrowers who meet the eligibility requirements have a higher chance of their Home Loan applications being approved.
The good thing is you can improve your eligibility. This blog will find the best tips to increase your Home Loan eligibility.
Home Loan Eligibility – A brief
Home Loan Eligibility determines the loan amount you will receive. To own a home with a loan, check the requirements for age, income, job type and credit score. Banks may also consider other factors when determining your Home Loan eligibility.
Everything to Know About Your Home Loan Eligibility
Banks undergo a meticulous process to verify every applicant’s loan eligibility for a Home Loan. An applicant’s profile includes – income, type of employment, credit score and other things. By following the below tips, applicants can increase their eligibility for approval.
Choose a Long Tenure
A longer-tenured Home Loan can boost Home Loan eligibility. This way, you’ll have more time for your repayments. Although a longer-term Home Loan lowers your EMI, the total interest payable will be high. Maintain a balance between your loan amount and opting for a long payback period. You can use an EMI calculator home loan tool to know which tenure and interest payable are suitable for your budget.
Prefer a Higher Down Payment
Making a larger down payment is always advised. This way, borrowers can avoid paying higher Home Loan rates of interest. When the down payment is high, the loan requirement is less, automatically reducing the interest payable.
Ratio of Outstanding Debts & Loans
The debt-to-income ratio is crucial for assessing a Home Loan applicant’s eligibility. Pay off all debt since this will increase the eligibility for a Home Loan. In addition, doing so will raise the credit score.
Joint Home Loans are Still Your Options
If your family includes multiple earners, opt for joint applications, which will increase your chances of becoming eligible for higher loan amount.
The best action would be to submit a Home Loan application with your spouse, parents, or both. The benefits of co-borrowing are – high Home Loan eligibility, shared repayment responsibility and tax advantages.
Know Your Credit Scores
Home Loan eligibility is much more tenable for borrowers who have a high credit score. To accomplish that, timely repayments are key.
While your credit score will be positively affected if you are punctual with your credit card payments and monthly instalments (EMIs), any delay or fallback can be negatively affected. The bank typically checks your credit score when you apply for a Home Loan. The check is done to evaluate your creditworthiness.
Show your Additional Income
When you disclose your overall income from different sources, your Home Loan eligibility increases. Other sources of income may include rental income, a side business, etc. So, if you have such sources, use them to enhance your income portfolio for the loan application. A banks consider the application where there is less risk regarding the loan repayment.
Frequency of Job Switches
If you are a salaried individual arranging to apply for a Home Loan, continuous employment with the same company is vital. Regular job changes affect the amount of eligibility for Home Loans. So before you approach a bank for a Home Loan, consider your work experience. Because this can be the factor that makes or breaks your loan application.
Ways to Know Home Loan Eligibility
To determine Home Loan eligibility, consider various factors, including:
- Income: Banks usually look for a stable source of income and a minimum level of income to repay the loan.
- Employment: Banks prefer borrowers who have stable jobs with a good track record of employment.
- Credit Score: A good credit score is important to secure a Home Loan. It reflects your creditworthiness and ability to repay the loan.
- Age: Age is also an important factor in determining Home Loan eligibility. Most banks prefer borrowers who are at least 21 years old and below 60-65 years old.
- Property: The property you wish to purchase also affects your Home Loan eligibility. Lenders consider factors such as location, construction quality, and market value.
- Loan-to-Value Ratio (LTV): Lenders use the LTV ratio to determine the loan amount you can get for a property. LTV is the ratio of the loan amount to the property value.
- Other debts and liabilities: Lenders will also consider other debts and liabilities you have, such as personal loans, credit card debt, and car loans, to determine your Home Loan eligibility.
- Documentation: You will also need to provide documentation to support your application, such as ID proof, income proof, and property documents.
When you follow the suggestions above, you can increase your chances of getting a Home Loan. Qualifying for a Home Loan is not everyone’s cup of tea, this is why you need some tips to help you through this. You can start the process by raising your credit scores and, if necessary, correcting any mistakes. Then, maintain a low debt-to-income ratio while actively saving for a down payment on the house of your dreams.