A home loan is a long-term secured loan offered by banks to fund the purchase of a house. Not all people applying for a home loan get it. As this is a long-term loan, banks evaluate the borrower on certain parameters. If they are satisfied with the credit score and financial stability of the borrower, the home loan is sanctioned.
Some of these parameters include the age of the applicant, income, employment type, credit score and so on. In order to avail a home loan, a borrower must check eligibility before applying for the loan. This article aims to discuss certain tips and tricks that enhance home loan eligibility.
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See Also: Tips For Home Loan EMI Repayment
Opt for Longer Tenure: The eligibility also rises with an increase in home loan tenure. A longer tenure ensures you have a good amount of time to repay the home loan. So, the possibility of timely repayment of the home loan also increases. Generally, the loan is repaid within or before the tenure. However, to reduce risk of defaults, banks sanction home loans with a higher tenure, so that the borrower has enough time to repay the home loan.
Pre-Payment of Existing Loans: Make sure to clear all existing debt before applying for a home loan. If you already have an existing loan, your debt to income ratio is high. By evaluating your debt to income ratio, your bank may decide to sanction a lesser home loan amount or may charge a higher interest rate on the home loan.
The bank assumes that the borrower is already burdened with high monthly EMIs and by sanctioning a higher loan amount the borrower may not be able to bear the additional burden and may end up defaulting on the home loan. In some cases, the lender may also reject your home loan application.
See Also: Home Loan Interest Rates
Improve Credit Score: Your credit score has a key role to play in getting home loan sanctioned. Your credit score affects the rate of interest and the terms and conditions imposed by your lender. A good credit score shows the bank that you are able to manage debt responsibly and will repay home loan EMIs on time. A credit score of 750 or above is preferred by banks while sanctioning the home loan. Maintain a good credit score to get the home loan sanctioned.
Other Sources of Income: if you have any additional sources of income, then this is instrumental in increasing home loan eligibility. Additional sources of income may be rental income, income from a part-time business; income from freelancing and so on. Additional sources of income assure the lender that the borrower is financially stable and helps qualify for a higher home loan amount.
Include Spouse as Co-Applicant: if your spouse is engaged in business or is employed in an MNC, this is an added benefit. Your spouse can co-sign the home loan and you can avail a joint home loan.
In this case, the lender evaluates the credit history of both the applicants. You can get a higher loan amount and better interest rate on home loan. Both the borrowers can avail tax benefits on home loan principal and the interest repayments on the home loan.
Open Account with the Chosen Lender: If you have already zeroed-in on a bank and wish to apply for a home loan within 6 months or a year, you can open a bank account with them. In this way you can build a relationship with the bank. So, when you apply for a home loan, you are given preference as you are an existing customer of the bank.
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