Before you apply for a loan, it is a good idea to check your loan eligibility. Lenders sanction house loans based on your loan eligibility; you can take a few steps to increase your home loan eligibility to ensure you get a loan per your requirements. Lower loan eligibility could result in a smaller loan sanctioned, which may hamper your prospects of buying the house of your choice.
Below we discuss a few aspects that can help increase your loan eligibility.
8 Factors that Increase Your Home Loan Eligibility
Improve Your Credit Score
Credit scores reflect your creditworthiness; they are the first step in your loan application assessment. A low score could lead to an outright loan application rejection. A healthy credit score indicates you are a responsible borrower; lenders are willing to sanction higher loans to those with a good credit rating.
Before you apply for a loan, check your credit report and try to improve it by rectifying errors (if any) or clearing overdue payments.
Pre-pay Your Loans
Lenders consider the debt to income ratio before they sanction house loan.
If you already have multiple running loans, consider pre-paying them. A high incidence of EMIs could make the lender feel that you may not be ready to bear the burden of additional loan installments. If conditions permit, pre-paying a loan may help enhance your loan eligibility.
You need to consider pre-payment charges also before you make the decision.
Adding A Co-applicant Can Help
Another way to improve loan eligibility is to add a co-applicant. You can add a parent or your spouse as a co-applicant if they have a stable source of income and a good credit score.
The co-applicants earnings and creditworthiness will add to your eligibility.
Consider A Longer Loan Term
A longer loan tenure also increases your loan eligibility. As you have more time to repay your loans, lenders have confidence in your repayment capacity and might be willing to sanction a bigger loan.
An EMI calculator home loan can be used to estimate your monthly installments. A longer-term reduces the lender’s risk.
Show Additional Source Of Income
Your income levels are a crucial factor in determining loan eligibility. If you have some additional source of income from investments or business or some rental income, you should include the details in the application form.
Any income apart from the net income from your job or business can be considered additional income.
Step-up Loans Can Help
Those with a lower net monthly salary or may struggle to pay high EMIs can consider a Step-up loan.
Under a Step-up loan, the lenders offer loans for which the EMIs are lower in the initial repayment years. With passing years, the EMI increases as the borrower’s income will also increase with passing years.
You can use an EMI calculator for a home loan to estimate the difference in the installment amount due to the change in tenure.
Do Not Switch Jobs Frequently
Lenders look at your source of income and its stability to assess if you would be able to repay your EMIs regularly. For this, not only your income level is critical but also the length of your service and, in the case of a business, the number of years you have been running it.
If you switch jobs frequently, then lenders might not view you as a dependable borrower. If you plan to take a loan in the near future, try not to switch jobs frequently.
Have An Existing Relationship With The Lender
If you have finalized the lender and there is some time before you have to apply for a loan, you can consider opening a bank account with the lender.
Alternatively, you can also consider applying for a home loan with the bank which you already have a bank account with. Banks view applications of those with an existing banking relationship favorably, as they can assess their banking history and financial behavior.
Buying a home requires a lot of deliberation, and so does taking a loan. The right amount of house loans can help you buy the home of your preference. An amount less than that may require you to either compromise on your choice or dip in your savings which might compromise your liquidity.