Even though purchasing a house requires buyers to invest substantially, the process has been eased out in recent times owing to the easy availability of home loans. However, the process also involves satisfying certain parameters pertaining to one’s eligibility to avail of the advance.
It is these factors that enable financial institutions to ascertain an individual’s responsibility as a borrower. Here are a few factors to take note of that can help improve home loan eligibility of a prospective borrower –
- CIBIL score
- Shorter tenor
- Clearing off all existing debts
- Presenting every source of income
- Opting for a joint loan
Following is a detailed look at these factors –
It is an essential factor and is instrumental in determining a borrower’s eligibility while applying for a home loan. A properly maintained CIBIL score ensures your creditworthiness as a borrower. It also provides an assessment of your ways to manage credit. Many financial institutions consider 700 to be the least score to qualify for a home loan application. But the actual goal is to keep the score threshold from 750 to 900 to enjoy convenient loan terms.
Opting for shorter tenors to repay the loan amount is another important factor that can enhance your eligibility. A longer-term inversely affects your monthly instalments, resulting in a significant reduction in the EMIs. However, doing so leads to an increase in the total amount of interest payable in the long run. A longer tenor also increases your risk as a potential borrower. Choosing a shorter tenor, however, helps to improve home loan eligibility.
Clearing off all existing debts
A very basic concept regarding any debt is that it is a form of financial obligation that takes up a part of your income. In instances like these, always try to clear off any existing debts. This helps enhance your credit score and assures a well-maintained credit history, which creates a good impression on the lender.
Presenting every source of income
In order to get the best offers on home loans, presenting every source of your income is a mandate. Informing the lender about every other source of income along with the primary one adds up to the total monthly earning. This, in turn, helps to enhance the debt-to-income ratio and acts as an assurance for financial institutions about the borrower’s repayment capability. This is also a great way to improve home loan eligibility.
Opting for a joint loan
Another way to enhance home loan eligibility is by applying for a joint loan. Using a co-applicant, preferably one, who has a stable income, lowers the risk of defaulting on the loan. Joint loans help in acquiring higher loan amounts at a low rate of interest. Moreover, both the applicant and co-applicant can enjoy tax benefits as per the Income Tax Act, 1961.
Apart from these factors, it is always advisable to thoroughly research the loan amount and payable EMIs before applying for a home loan. To do that, a home loan calculator can be very helpful. It can help you to get an idea of the exact loan amount and EMIs so that you can arrange for finances accordingly. Added to that, improving your eligibility allows you to avail the lowest housing loan interest rate.
Prospective borrowers can also look for pre-approved offers to expedite the application process. These offers are available on financial products like home loans, personal loans, loan against properties and more. Check your pre-approved offers today by providing a few essential details like your name and contact information.
Applying for a loan by taking these few factors into consideration can help improve the entire borrowing experience for an individual.