Home loans are a type of mortgage loan offered by banks and other financial institutions to help individuals buy or construct a residential property. They provide financing to purchase or build a home, refinance an existing home loan, or improve a property.
Home loans usually come with a long repayment tenure of up to 20 years and offer various features such as flexible repayment options, tax benefits, and the option to avail of a loan for a portion of the property’s value. Factors like your and your spouse’s income, age, employment status, and credit score are typically considered to determine your home loan eligibility.
Here are 5 tips that can help increase your home loan eligibility:
1. Maintain a stable job and income – stability in employment and income shows lenders that you have a steady stream of income to repay the loan
Stable employment and income are important factors that lenders consider when evaluating a home loan application. This helps them determine your ability to repay the loan and reduces the risk of default. While evaluating a home loan application, lenders gauge the borrower’s financial capacity to ensure they have an adequate source of income to make mortgage payments in a timely manner.
2. Improve your credit score – a higher credit score demonstrates financial responsibility and increases your chances of loan approval
Lenders often consider a good credit score a sign of a borrower’s ability to repay the loan, so improving your credit score can increase your home loan eligibility. You can improve your creditworthiness by paying bills on time, reducing credit card balances, and fixing errors in your credit report.
3. Minimize existing debts – having fewer debts improves your debt-to-income ratio, making you a more attractive loan candidate
Minimising your existing debts can increase your home loan eligibility as it demonstrates to lenders that you can repay the loan. Lenders use the debt-to-income ratio to assess the risk associated with lending to you, and a lower ratio can make you a more attractive loan candidate. By paying off or reducing existing debts, you can improve your debt-to-income ratio, increasing your chances of being approved for a home loan.
4. Consider a co-applicant – having a co-applicant can increase your eligibility as their income will be considered for loan approval
A co-applicant can increase your home loan eligibility by including their income in the loan approval process. Lenders consider the combined income of all loan applicants when evaluating a loan application, so having a steady co-applicant can increase your chances of being approved for a larger loan amount. However, it is important to note that the co-applicant is also responsible for repaying the loan, so choose a co-applicant with a good credit history and who is financially stable.
5. Provide collateral – offering collateral such as property or investments can increase your loan eligibility and reduce the risk for the lender
Offering collateral can increase your home loan eligibility because it provides security for the lender. If you cannot make loan repayments, the lender can use the collateral as a payment source. This reduces the risk for the lender and makes them more willing to approve a larger loan amount. However, it is important to note that if you default on the loan, you may lose the collateral used to secure it.
It is important to remember that each financial institution may have different eligibility criteria for sanctioning home loans in India. These criteria can change from time to time.