Checking your home loan eligibility is a crucial step in the entire home loan process. Banks and Housing Finance Companies approve applications of those borrowers who meet their set eligibility criteria, whereas those who do not meet the lender’s requirements may have to face rejection. But the good news is that you can enhance your loan eligibility by taking note of the following steps.
Make existing loan repayment: While approving your home loan application, the lenders will check whether you have any previous debts or not. They try to figure out if you are paying your credit card bills and prevalent loans on time. Missing or skip these payments can hurt your credit score. Hence, it is recommended to repay your existing debts on time. Having a satisfactory repayment history ameliorates your possibility of getting your home loan approved.
Opt for a longer tenure: Loans with longer tenure results in lowering your monthly EMIs. Plus, it also gives the additional time to the borrower to repay their loans. As a result, the borrowers can make their payments on time that further reduces the risk of the lender. However, on the flip side, longer tenure loans may lead you to pay higher interest over the loan tenure.
Assess your affordability to repay and then apply: Before applying for a home loan, you must assess if you can afford to repay your loan easily or not. For this, you can make use of the EMI Calculator tool available on the digital lending portals to calculate your monthly EMIs. It gives holistic information like the principal and interest component of each EMI, date of payment, etc. Doing so will help you plan your monthly budget in a better way.
Work on improving your credit scores: Your credit score plays a vital role in deciding the loan approval, as well as the loan amount. A credit score of 750 and above is considered good and preferred by most of the financial institutions. Such a credit score makes you a more creditworthy and risk-free borrower in the eyes of the lender. Moreover, a good credit score also helps you to avail of a home loan at a lower rate of interest. To know your credit score, you can download your credit report online.
Consider step-up home loans: Step-up home loans are the best option for those individuals who are at the early or mid-career stage with considerably low income. Under a step-up loan scheme, respective lenders offer loans at lower EMIs in the initial years and gradually increase them so that the borrower becomes financially more secure to repay the outstanding loan amount in the later years. However, the lenders determine your eligibility based on your current profession and its future aspects.
Opt for a joint loan: One of the best ways to improve your house loan eligibility is to apply for a joint home loan. Applying for the loan with another applicant, who is employed and has a good credit score increases your chances of loan approval and get a higher loan amount. This is because, when you opt for a joint loan, the lender considers the income of both the applicants. This further improves your creditworthiness as well as assists you in availing better terms and a low rate of interest on your loan.
Show additional income sources: If you have any additional income sources, you can show them to your lending institution. Income from other sources may be from fixed deposits, mutual fund dividends, business income, or even rental income from another property. Doing so gives the advantage of securing a higher loan amount, as it improves your financial health.
Open an account with your preferred lender: If you have finalized the lender and wish to apply for a home loan within a year or before, you can start the relationship with the lender by opening a bank account with them. By doing so, you will get enough time to build a relationship with your chosen lender. A good relationship with your lender will increase your eligibility for home loans.