The current pandemic's unexpected silver lining is a drop in interest rates for house loans. Now is a fantastic moment for first-time homebuyers to finally take the plunge and apply for a home loan to buy their dream home because of the low cost of real estate.
We must strongly advise you to act quickly if you plan to take advantage of the low home loan rate environment by applying for a home loan in the upcoming months. Market analysts believe that when people realize the value of having a home of their own to unwind and feel comfortable with their family in the post-Covid-19 era, housing prices will rise. Additionally, families are eager to expand their living quarters as businesses announce permanent work-from-home policies and schools provide online learning. Therefore, the demand for properties in desirable residential regions would inevitably rise.
How is home loan eligibility determined?
You can select a bank or HFC for your home loans (Housing Finance Company). Your home loan eligibility will determine if you are eligible for a house loan and the amount you can obtain from the lender, irrespective of the lender you select.
Common variables that affect eligibility for a home loan include:
Income and repayment capacity of the borrower
Borrowers with a consistent and predictable income are preferred by lenders. Therefore, you may anticipate the lender asking for specifics about your income levels.
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If you are a salaried employee, you must submit pay stubs, bank account statements, employment information, etc.
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Individuals who are self-employed must provide information about their business income and other sources of income.
Age of the borrower
Most lenders prefer young borrowers who are in their prime earning years because home loans have a long term of 20 to 30 years. There are cut off ages set by some lenders beyond which loan applications will not be authorized. Most lenders prefer that customers pay off their loan before they retire.
The credit score of the applicant
Creditworthiness can be determined in part by your credit score. Borrowers with credit scores above 750 are preferred by lenders. A high credit score demonstrates your responsibility for making timely credit repayments. A high credit score not only increases your eligibility possibilities but also gets you lower loan rates.
Other existing loan taken by the borrower
Your eligibility for a home loan is also impacted by any other loans you have open, such as a personal loan, auto loan, or two-wheeler loan. Your other existing liabilities, such as your other loan EMIs, must be disclosed to lenders. If your monthly payment exceeds 40 to 50 percent of your take-home earnings, banks will not grant a loan.
You may establish your loan eligibility and the maximum loan amount you are eligible for using a number of online home loan eligibility calculators. Here are some wise suggestions to improve your eligibility for a house loan if you don't meet the prerequisites:
Best ways to increase home loan eligibility
Maintain a credit score of 750+
Good repayment capacity is indicated by a high credit score. Your creditworthiness increases, making you a more attractive borrower. A high credit score also helps you get an interest rate reduction. Checking your credit score on a regular basis is imperative before applying for a home loan (or any loan, for that matter). Take the necessary steps to raise your credit score if it drops below 750 to prevent home loan denials.
Take a joint home loan
By adding a co-applicant who makes money and has strong credit, you can increase your chance of getting a home loan. The amount of the loan you can borrow also rises when you add a co-applicant. Please take note that you may only list immediate family members as co-applicants, such as your spouse, children, siblings, or parents. Co-applicants are not permitted to be friends or other acquaintances.
Repay all your debts on time
You may increase your credit ratings and track record, which increases your eligibility for home loans, by paying off existing debts like personal loan EMIs and car loan EMIs on schedule.
Offer a larger down payment
Home loans are not approved for the full value of the property. Home loans are typically available for 80% to 90% of the value of the house. The remaining amount, referred to as the down payment, must be paid out of pocket. You can improve your eligibility for a house loan by raising the required down payment from 10% to 20%. By lowering the loan amount, you increase your eligibility because the lender will be taking on less risk.
Opt for a lender with your preferred lender
Before applying for a home loan, you should ideally examine and assess lenders at least a year in advance. Develop a strong relationship with the lender during this one year. Open a savings account with the lender or make an investment in an FD. This increases your likelihood of being approved for a house loan by giving the lender enough time to comprehend your spending patterns.
Show proof of additional income sources
If you can provide evidence of additional sources of income, your chances of being approved for a home loan increase dramatically. Having enough savings and investments also works in your favor because it shows that you have a greater ability to make payments.
Go for a longer tenure
Your financial hardship is lessened by a long tenure because your EMIs are lower. You are more likely to make on-time payments because the EMI is lower. However, keep in mind that paying smaller EMIs means paying more interest overall throughout the course of the loan.
Conclusion
The largest financial asset we hold in our lives is our house. The simplest method to realize your housing goals is with a home loan. Use these suggestions to improve your eligibility if your prospects of receiving a home loan sanction are slim. Before submitting an application for a loan, use a home loan eligibility calculator to assess your situation and take the necessary steps to improve it.
