The demand for home loans in H1 2022 witnessed a surge of about 26%, primarily due to affordable interest rates and reduced real estate prices in selected cities. Although the demand for this credit is rising, financial institutions also restructured their eligibility parameters to fight the growing NPA in this segment.
Hence, irrespective of your financial background, you can follow some simple tips to boost your home loan eligibility and ensure faster approval.
Top 6 tips to boost housing loan eligibility
Meeting the eligibility criteria is an integral part of borrowing. Individuals can get the desired loan amount at better terms with the right eligibility.
Following are some simple tips and tricks that borrowers can follow to improve their housing loan eligibility criteria:
- Try to maintain a credit score of 750 and above
After getting a home loan application, the first thing that lenders do is check the applicant’s credit score and history. Since this score indicates a borrower’s creditworthiness, intending borrowers can adopt some common practices to maintain a high credit score.
- Clearing the existing debts faster.
- Limit multiple credit inquiries.
- Keep the credit utilization ratio below 30%.
- Close all the previous loan accounts after they are repaid.
- Maintain a healthy mix of secured and unsecured credit.
Moreover, individuals should also know how a credit score can determine their home loan EMIs. Ideally, a score of 750 and above is considered perfect for securing a home loan.
- Mention all income sources.
Lenders check applicants’ monthly income to ascertain the credit’s timely repayment. Hence, individuals with higher monthly payments are likely to get the best offers on a home loan and vice-versa.
However, individuals can also cite additional income sources to improve home loan eligibility. It includes rental income, interest yield from term investments, etc. Besides, they should also consider the debt-to-income ratio, which should not exceed 40% of the monthly payment.
- Meet the lender-specific eligibility.
The home loan eligibility varies with lenders. Hence, you must meet lender-specific eligibility parameters to avail of the best deal.
Note that salaried and self-employed individuals’ home loan eligibility criteria differ. Following are some common requisites for this finance mentioned below:
- Must be a residing Indian citizen.
- Age should range between 23 and 62 years for salaried and from 25 to 70 years for self-employed individuals.
- Salaried applicants must have work experience of at least three years.
- Self-employed individuals should have a business vintage of at least five years.
You can also use a home loan eligibility calculator available online. Almost all leading financial institutions offer this tool to guarantee customers’ convenience.
Selected HFCs also extend pre-approved offers that simplify and expedite loan processing. Besides home loans, these are also available on loan against property. Enter your name and contact number to check your pre-approved offer within seconds.
- Submit all necessary documents.
Documentation is another vital aspect of the housing loan process. Irrespective of the loan amount, individuals must submit a list of documents to get faster approval.
It includes the following:
- KYC documents
- Photograph of applicant(s)
- Bank account details for last six months
- Latest salary slips or Form 16
- Proof of business for self-employed
- Property documents
However, individuals may have to submit additional documents as and when required. It will help borrowers prove their credibility and secure competitive interest rates.
- Choose a longer tenor.
A home loan is typically a long-term credit, so the home loan EMI is usually affordable. However, you can also choose a longer tenor to improve the eligibility. Since with longer tenor, the monthly payable further reduces, lenders can be assured of timely payment.
Must Read: Know About Mortgage Loans in India
However, with a longer tenor, the total interest outgo increases. Thus, while you can reduce your home loan tenor and save lakhs, it impacts your eligibility, especially if your disposable income is low.
In this regard, you can use an online home loan EMI calculator to check the monthly payable.
- Add a co-applicant
Another effective way to boost home loan eligibility is by applying for a joint loan. Individuals should look for a co-applicant with a high credit score and impressive credit history. It will assure the lender of hassle-free repayment. In turn, it ensures better interest rates and better terms.
Individuals can follow the tips mentioned above to boost their home loan eligibility. Besides, the down payment amount also determines loan eligibility to a great extent; a higher down payment translates to better eligibility and interest rates.