Here’s how to increase home loan eligibility

• Follow

Home loan helps a lot in fulfilling the goal of a dream home. But the bank has some criteria to fulfil for giving home loan, without which it is difficult to get a loan. If you do not fulfil these then the banks refuse to approve the loan and cite various reasons. In such a situation, to get the home loan approved quickly, you will have to increase your loan eligibility. There are some easy ways to do this. Let us get to know about them.

Maintain Good Credit Score

Credit score is one of the major factors in determining home loan eligibility. A good credit score reflects your creditworthiness. Banks use it to check your repayment capacity. The chances of getting a loan increase if the credit score is 750 or more. To maintain a good credit score, it is important to pay bills and loans on time and keep the credit utilisation ratio low.

Increase your earnings

Banks look at your earnings to check loan eligibility. Higher the income, higher the ability to repay the loan, which makes you a suitable customer in the eyes of the bank. You have to check how much loan the bank is giving against your salary. If you are not getting as much loan against your salary as you want, then wait for a bit. First increase your income through a well-paid job, freelance work or side business. If you earn any amount from rent then show it as income.

Reduce debt

Before approving a loan, banks look at a person’s debt-to-income (DTI) ratio, i.e. what portion of the income goes towards repaying the loan. A high debt-to-income ratio indicates that you may face difficulty in repaying the loan. Therefore, before applying for a new loan, it is important to reduce the debt by paying off other loans like credit card bills, personal loans, etc. Eligibility for new loans increases as the share of debt in income decreases.

Saving for down payment While buying a house, you have to pay a fixed amount as down payment. If the down payment amount is substantial, you need less loan. Due to which the risk of the bank reduces and the chances of getting the loan increase. Besides, your EMI reduces and overall interest also has to be paid.

Long Tenure

One way to improve loan eligibility is to choose a long term option. However, by increasing the tenure of the loan, the interest amount increases. Suppose you take a home loan of Rs 25 lakh for 20 years at 9 percent, then the EMI will be Rs 22,493. Interest of about Rs 29 lakh will have to be paid in 20 years. If the loan tenure is kept for 30 years, EMI will reduce to Rs 20,116. But the total interest will increase to Rs 47.41 lakh. In this way, if the tenure is extended by 10 years, an extra amount of Rs 17 lakh will have to be paid. However, due to low EMI, even people with low income become eligible to take the loan.

Take joint home loan

Forming a partnership is one of the most commonly used options to increase the chances of getting a home loan. In this option, you can increase the eligibility by making your spouse a co-applicant. When taking a joint home loan, banks consider the income of both the applicants. With this you can buy a big dream home by taking a big loan.

Before fulfilling your dream of owning a house, you have to keep some things in mind so that your dream does not end up becoming a nightmare for you. Before buying a home, plan to include the down payment and additional expenses like stamp duty and registration charges. The higher the down payment, lesser the interest will have to be paid. This will increase your returns from property. Always keep the tenure of the loan as much as your pocket can afford.