Banks follow a strict home loan eligibility to approve your home loan. They assess the income, credit score, and other factors about a borrower to sanction a home loan. Go through the tips in this article to increase your eligibility for a home loan in India.
1. Include a Co-Applicant
When you add a co-applicant with a good credit score to your applicant, the chance of your loan getting approved increases. It will also help increase your maximum loan amount as it will show an improvement in your EMI affordability. Sometimes the income of all the family members is clubbed to figure out the borrower’s eligibility.
2. Choose a Long Tenure
Many people choose a short tenure for home loans because the burden of repaying the loan gets over in a short period. But a longer tenure can increase your eligibility for a home loan.
A longer loan tenure will ensure that you bear a low EMI amount. But the downside is that a long tenure increases the home loan interest rates. Therefore, you will have to pay a higher amount to get more time for repaying your loan.
3. Maintain a Credit Score Over 750
A high credit score makes you fall under the good books of a lending institution. A high credit score, preferably around 800, will indicate a high repayment ability. It may also ensure that the lender may offers you the loan at a lower interest rate. Keep track of your credit score from time to time to ensure that they are not too low for loan approval. You can take corrective measures to increase your credit score and reduce your chance of loan rejections.
4. Come Clean About Your Additional Sources of Income
The eligibility for a home loan will automatically increase when you show proof of additional sources of income. Your additional sources of income can be a part-time business, rental income, or anything that can improve your financial standing. When you reveal your additional sources of income, you are also likely to secure a higher loan amount.
5. Clear Your Debts on Time
Paying your debts can help you build a high credit score. If you are applying for a home loan, you should strive to pay all your debts on time. It will have a positive impact on your repayment abilities. The lender will trust that you will pay the EMIs on time.
6. Keep FOIR Under 60%
FOIR or Fixed Obligation to Income Ratio revolves around the ratio of your debts to your income. It is a crucial parameter that can help in improving your home loan eligibility. On average, an individual needs 50% of their income for bearing living expenses. If you want to get a home loan, you should keep your FOIR around 60%. It will heighten the chances of your loan approval.
7. Avoid Changing Jobs
If you are planning to get a home loan, you need to be working in one organisation for at least two years. Your loan eligibility amount is often low if you have changed jobs frequently. Therefore, opt for a home loan after working for two years in the same organisation to get your home loan approved.
Finding the right lender also has a huge impact on your home loan approval. Talk to various lenders and settle with the one offering the best rates.