Over the years, the demand for home loan has grown exponentially, thanks to the affordable interest rates, an increase in disposable income, easy availability of credit, etc.
- The home loans in India grew Y-o-Y 7.7% in January 2021.
- Almost 7,929 housing units were sold only in Mumbai in October 2020.
Besides tier-1, 2 and 3 cities also contributed greatly in terms of the loan disbursal. However, before applying for this credit, individuals need to check the eligibility to avail the best rates on the loan amount availed.
Although the parameters change with lenders, individuals can follow some simple tips to meet the standard requisites for this credit.
Top tips to improve the home loan eligibility in 2021
Lenders approve a home loan only after assessing several factors pertaining to an applicant’s eligibility. It is one way to ascertain the timely repayment of this credit that eventually reduces the risk of default.
Here are the some tips that individuals can follow to meet home loan eligibility and facilitate the loan process.
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Select the property type carefully
Being an asset-backed credit, home loan eligibility also depends on the type of property chosen. For instance, a residential property in a good location with the modern amenities will draw substantial funds. Also, remember to check the registration of the property and other vital aspects to increase eligibility.
2. Adopt the financial habits to improve the credit score
Most lenders sanction a housing loan only to those with a good credit score. One of the simplest ways to increase eligibility is paying loan and credit card bills regularly. You can follow the below-mentioned steps to ensure it –
- Pay the EMIs and credit card bills in full within the due date.
- Maintain a Credit Utilisation Ratio below 30% of your card’s credit limit.
- Avoid applying for the multiple loans at a time as higher inquiries lead to lower CIBIL score.
- Try not to opt for a loan settlement or default to keep your CIBIL score high.
Along with that, also check your CIBIL report and score regularly for any discrepancies.
3. Choose a longer tenor
Conventionally, a home loan comes with a longer tenor of up to 30 years that offers enough time for borrowers to repay the loan comfortably. Moreover, when one chooses a longer tenor, it ascertains the lenders about the repayment of this fund with comparatively lower EMI.
Thus, if one wants to improve his/her home loan eligibility, one can opt for the maximum tenor possible. However, they should also remember that with a longer tenor, the interest payable increases accordingly.
For instance, if one opts for a home loan of Rs.20 lakh with an interest rate of 10% for 20 years, he/she has to pay an EMI of Rs.19,300, and the total payable interest would be Rs.26,32,301.
On the other hand, when the tenor is extended to 25 years, the EMI decreases to Rs.18,174, and the total interest becomes Rs.34,52,218.
However, since with the longer tenor, home loan EMI decreases significantly, it allows individuals to borrow with the lower income level by satisfying FOIR requirement.
4. Consider taking a joint home loan
Individuals who find it challenging to meet the home loan eligibility criteria of a home loan can also opt for a joint loan. Besides improved eligibility, it also accompanies a host of benefits that borrowers can leverage.
This option becomes the most feasible when one co-borrows with his/her spouse, who can split the repayment burden. It makes them eligible for home loan tax benefits as well.
5. Mention all income sources
Another way to improve your home loan eligibility is by adding additional income sources like rental yields, income from a business, etc. If you have a second house, you can also rent it out to increase monthly income and increase your FOIR better for borrowing.
Along with that, individuals also need to submit all relevant documents to increase their home loan eligibility. For instance, they need to present employment proof, KYC, property documents, ITR, bank account details and the others, depending on the lender.
6. Approach a known lender
Once you decide to apply for a home loan, you can approach a lender known to you. Moreover, if you have a smooth repayment history with the same lender in the past, you can negotiate better terms and interest rates.
Besides improving credit score, doing this also expedites the loan application process. Select the housing finance companies also extend pre-approved offers that further hasten loan processing. Such offers are available on the various products like loans against property, home loans and many more. You can enter your name and mobile number to check your pre-approved offer.
Lastly, satisfying home loan eligibility helps in securing the best loan offers available currently. Additionally, based on these parameters, you can negotiate with your lenders for better service terms and competitive interest rates.
Read More: Know Everything About Baja Housing Finance Home Loan Eligibility criteria
