How to increase your eligibility for home loan: There are many things that lenders keep in mind while considering a home loan application. Key among these include your income, age, working age, LTV ratio, property features and repayment of your existing loan. Failure to meet the cut-offs set by the lenders may result in rejection of your home loan application. Let us take a look at 5 ways that can help you increase your home loan eligibility and approval prospects.
make more down payment
RBI allows lenders to finance 75 to 90 per cent of the value of the property through home loans. The remaining part of the value of the property has to be paid by the lender as down payment or margin contribution from its own resources. Where most home loan applications aim for a minimum down payment or margin amount. At the same time, higher down payment or margin amount has its advantages. First, due to the lower loan amount, the EMI and interest will be lower. Along with this, making a higher down payment or margin contribution will reduce the credit risk for the lenders, thereby increasing the chances of getting a home loan approval at a lower interest rate.
take joint loan
Applicants who have insufficient income, low credit score, high EMIs, etc. are more likely to get a home loan rejection. Such borrowers should include a family member as a co-applicant to enhance their loan eligibility. In such a situation, priority should be given to the one who has a stable income and a good credit score. Apart from increasing the expectation of loan approval, a larger loan amount will also be available. Apart from this, due to the co-applicant being a woman, some banks also offer home loans at low interest rates.
Keep the repayment period longer
The longer the tenure of the loan, the lower your EMI, which will also increase your loan eligibility. However, due to the non-essential extended tenure, the total interest on your home loan will increase. Hence, those looking to avail a home loan should check the loan repayment tenure based on their repayment capacity using an online home loan calculator. Borrowers can prepay later to reduce their interest cost, when they have surplus funds in future.
Compare Home Loan Offers from Different Lenders
The interest rate, processing fee, loan tenure and other home loan prices may vary depending on the home loan lender’s assessment of the credit risk of the home loan applicant. Therefore, home loan applicants should compare as many banks as possible before choosing a lender.
Home loan lenders may offer lower rates or better terms to existing customers, so home loan applicants should first approach the financial institutions they have a relationship with as a customer. Then, they should visit online financial marketplaces to compare interest rates and other features. This will help them choose the best home loan with low interest rate, right loan tenure and adequate loan amount.
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Review your credit score before applying
Credit score is one of the most important factors that lenders look for while evaluating a home loan application. Having a good credit score, i.e. 750 or more, can increase the loan eligibility and the rate of interest will also be low. Therefore, applicants should review their credit score before applying. This will enable those with a low credit score to take steps to improve their score and then apply for a loan with a better credit score.
(By: Ratan Chaudhary, Head of Home Loans, Paisabazar.com)