Applying for a Home Loan is one of your life’s most important financial decisions. Banks use several measures to determine a borrower’s eligibility. You should know how they do it to get a better idea and higher chances of approval for the desired Loan amount.
The eligibility for Home Loans is determined by considering numerous factors, such as income, existing obligations, applicants’ credit history, etc. Banks may also consider the Loan’s purpose, whether for the purchase or construction of a new property or against the existing one.
Tools required to assess your eligibility
Performing some research before applying for Housing Loans is essential, which includes gathering information about your budget, income, and credit scores and comparing the services and schemes of various banks. You get an idea of how much you can afford, making your decision simpler. A Home Loan eligibility calculator helps plan your initial downpayment for your house and the monthly outgo.
You need to enter various details, such as your monthly income, existing obligations, tenure, Loan purpose, etc. You can use this calculator to know the eligibility and EMI amount to plan your budget and affordability.
Best ways to increase your eligibility
- Maintain a good CIBIL score: High credit scores are essential factors banks consider when determining Loan eligibility. A high CIBIL score means a good borrowing history and your likelihood of repaying debts on time. Conversely, a low credit score means lesser chances of approval and higher interest payments. Check it before applying for the Loan.
- Choose a longer tenure: Typically, you can borrow a Home Loan for up to 30 years. A longer tenure spreads your payments over an extended period, making your finances more manageable. Longer tenures can also improve your credit scores as you can show your capability of repaying debts promptly.
- Add a co-applicant: Adding a co-applicant, like your spouse or parents, can improve your eligibility. If they have a good credit score, their additional income is considered for your eligibility assessment, letting them get a higher Loan amount than individual eligibility.
- Provide a supplementary income source: You can increase your eligibility for Home Loans by providing an additional income source besides the main one. For instance, you can include rental, interest, dividend, bonus, and variable payments, indicating a higher repayment capacity to repay your debts on time.
- Repay existing debts: If you have outstanding debts, for example, Car Loans, Credit Card payments, or tax debts, pay them off before applying for a new Home Loan. It indicates you are a responsible borrower capable of repaying your debts without defaulting. Simultaneously, it also increases your credit scores.
Conclusion
Signing up for a Home Loan is a big commitment. Doing everything you can to improve your eligibility to get a good deal is important. By following these tips, you can make yourself a more attractive candidate eligible for a higher Loan amount.