Mortgage loans enable individuals to fulfill their dreams of owning a home. Whether you’re a first-time buyer or looking to upgrade to a new home, home loans offer a convenient and accessible way to finance your real estate ambitions. These loans are offered by various financial institutions, such as banks and home finance companies, and are tailored to the specific needs of home buyers. However, securing a large home loan requires careful planning, financial stability and a strong credit history. Eligibility is determined by several factors, including credit score, loan term, repayment capacity, and income.
Also Read: RBI Holds Another Rate Hike; Home buyers ready to get relief
Lenders carry out a thorough assessment based on these elements to assess whether an applicant is eligible for a home loan. Understanding the methods of improving home loan eligibility enables applicants to take proactive steps and position themselves favorably for loan approval, moving them closer to owning their dream home.
From Forbes, there are several strategies to increase loan eligibility. Timely loan repayments, including credit card dues and EMIs, can help improve your CIBIL or credit score. Maintaining a low credit utilization rate is also beneficial. Teaming up with family members who have favorable credit scores and applying for a joint home loan can increase eligibility while dividing up repayment responsibility.
Opting for a longer loan term, although resulting in higher total interest payments, can increase the likelihood of approval. Settling existing debt has a positive impact on the debt-to-income ratio, and keeping the fixed obligation-to-income ratio (FOIR) below 40% increases the likelihood of obtaining a loan.
To improve your financial standing and ensure your eligibility, it is beneficial to disclose any additional sources of income, such as rental income or part-time businesses. In addition, making a higher down payment can lower the amount borrowed and reduce interest payments. Lenders generally prefer a stable employment history with a minimum of two years of continuous service.
Selecting the right lender based on your circumstances, such as home finance companies (HFCs) for individuals with informal sources of income or banks for paid clients with a strong credit score, is crucial in optimizing loan eligibility.
Finally, it is important not to rush the loan application process. Conduct thorough research, estimate your budget, check your credit report for errors, compare loan options, and carefully select the interest rates and terms that work best for you.