Buying a home is indeed a dream come true for many and first-time home buyers are greatly benefited by a home loan to own a property which offers time and easy terms. When you apply for a home loan, the first parameter that the bank or lender reviews are the eligibility criteria.
While a good credit score or rating and great credit history will be eligible for a home or housing loan by the bank, the loan amount depends on our income and the capacity to pay off the debt. The challenge arises when you’re, the loan applicants’, eligibility falls short of the respective bank’s requirements.
Here are a few simple and practical tips to increase your home loan eligibility. Review these points and find out where you need to work efficiently to boost your home loan eligibility.
Clear Your Existing Debt or Loans
Banks decide on the loan amount based on the disposable income of the loan applicant. If you have an existing loan or a credit card balance, clear them with an increased amount when you must pay on due date. While checking your financials, banks deduct your existing EMI obligation from the net income before approving the total loan amount.
By closing all your existing debt before you borrow funds towards owning a home, will certainly boost your disposable net income and your eligibility. This can qualify you for a bigger loan amount.
Make sure this is updated in your credit score as this could alter your credit score or rating. It’s always advisable to show the bank or the lender that you are capable to service the loan than the required Equated Monthly Instalment (EMI).
Apply Along with a Co-Applicant
While your net income is one of the primary criteria to calculate your home loan eligibility, it’s important that show all sources of income either through rent from another property or apply for the loan along with your spouse/ parents/ children.
Your combined income will surely improve your home loan eligibility as well as the total loan amount. Bank will consider both your income to arrive at the final loan amount that can be extended to you. This approach adds a lot of weight to your eligibility as this not only add additional income but also provide that extra security layer for banks, thereby, increasing your home loan eligibility.
Consider Longer Tenures
Banks or lenders will review your net monthly income to see if you’re able to accommodate loan EMIs coupled with your other expenses. If your net income is lower than the expected EMI for the loan after meeting all other expenses, chances are that the bank might not extend the loan to you. EMI obligation can be reduced by increasing the tenure of the loan, but you could end up paying a lot more due to the higher number of EMIs.
Maintain a Good Credit Score or Rating
By maintaining a good score always adds to your home loan eligibility. Most of all, this is within your control. You can achieve a good credit score by paying monthly instalments on time and making sure this information is updated on the credit score.
A good credit rating helps banks to consider if you have a good payment behaviour and understand how to service credit. Credit score forms the primary factor before a home loan is approved by a bank or a lender. So, keeping your credit history healthy certainly adds to your benefit.
Choose Reputed/ High Market Value Projects or Property
If you’re buying a flat or planning to build a house on a piece of land, make sure they are offered by reputed builders or a piece of land which has high market value. This enables banks or lenders to offer a higher valuation of the property thereby securing the loan extended to you. Projects or properties from lesser-known brands will discourage banks to offer a higher loan amount or higher tenure. Additionally, check with the builder who might tie-up with a bank to offer customised loan deals.
Home Loans with Top-up Feature
There are a few banks which offer top-up loans apart from the loan extended to purchase a flat or land. Once the original home loan is processed, these banks offer a top-up loan which is usually extended to fund furnishing your home. This way you’ll have the opportunity to set aside some funds the interiors of your home.