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Getting your home loan application approved to step into your dream property can be highly challenging. However, if you have comprehensive knowledge on the nuances of applying and obtaining home loans, it would be a cakewalk. Some of the essential tips to make your home loan process easier are,
Good Credit Score
Having a good credit score shows that you are a responsible borrower who has a track record of making on-time loan repayments. Additionally, you receive better interest rates. Make sure you pay your payments on time, pay off whatever debt you already have, and refrain from obtaining new credit if you want to keep or raise your credit score.
Stability in Income
When determining your loan eligibility, every financial institution is required to take your income into account. Naturally, having a larger salary increases your ability to repay debt, making you a more desirable borrower.
You should check to determine whether your present salary would qualify you for a home loan if you want to apply for one. If not, try to wait a little time and think about earning more money by beginning a side business, taking on freelance work, or finding a higher-paying employment.
Down Payment Savings
A down payment is the amount you pay the builder or owner upfront while purchasing the property. When applying for a home loan, the borrower must save money for the down payment; a 20% or greater down payment is ideal.
A larger down payment not only lowers the loan amount you need but also demonstrates to the lender that you are financially committed to the purchase, which can greatly increase your chances of loan approval.
Low Debt to Income Ratio
Your monthly sum of all debt payments divided by your gross monthly income is known as your debt-to-income (DTI) ratio. Lenders utilize your DTI ratio as one metric to assess your creditworthiness, or your capacity to repay loans that has been provided to you.
It makes a comparison between your monthly gross income and your monthly debt payments. A lower DTI ratio makes you a safer candidate for a loan since it shows that your income and debt are well-balanced. A DTI ratio of 36% or less is often preferred by lenders.
Loan-To-Value Ratio
The LTV ratio, when applied to the property value, will determine your eligibility for a home loan. A bank is compelled to restrict the loan amount based on the specified LTV ratios, even if your salary allows you to take out a larger loan. A higher LTV ratio increases the perceived risk for the borrower, whereas a lower LTV ratio might result in better conditions, such as reduced home loan interest rates.
Opt for Joint Home Loans
A joint house loan is one that is taken out by two or more people who are jointly liable for its repayment. These loans are frequently taken out in tandem to buy real estate. If your credit score or income aren’t enough, think about applying for a shared house loan with a co-applicant, such your spouse or a relative.
You may be more eligible if you have a co-applicant with steady income and a high credit score. However, take notice that loan repayment would be the responsibility of both applicants.
Longer Loan Tenure
By choosing a longer loan term, you may lower your monthly EMI and make payment management easier. By reducing your monthly financial load, this can enhance your eligibility even if it may result in an increase in the total interest paid throughout the loan’s term.
Longer loan tenure might range anywhere between 10 and 30 years. However, it is significant to understand that longer loan tenure will tend to have higher interest rate which will eventually increase the loan cost.
Clear The Existing Loans
It is highly benefitial to clear your existing loans like pesonal loans, car loans, credit card debts, and others before applying for a home loan. Your eligibility to acquire home loans will be evaluated by these liabilities. These liabilities represent your financial commitments. So if you have high existing liabilities then your eligibility to acquire home loans will be low. This it is always advisable to pay the existing loans before applying for a home loan.
Don’t Forget the Additional Income
You may be receiving a lot of benefits as part of or in addition to your income, or you may have some choices for variable pay. In order for lenders to take these extra earnings into account when determining your eligibility, you must maintain a record of all the benefits you receive from your employment.
You can increase your eligibility for housing finance if you have an unoccupied home in your hometown. You can rent it out and demonstrate that the money you make from renting this residence is an extra source of income for you. Your eligibility for a house loan will undoubtedly increase as a result.
Frequently Asked Questions
1. What is the eligibility criteria to acquire home loan?
Some of the factors that are considered as an eligibility to apply for home loan are a good credit score, age of the applicant, stability in income, debt-to-income ratio, existing liabilities, employment history, and more.
2. How do I increase my home loan limit?
You can increase your home loan eligibility in various ways. Some of the effective ways are increasing your income, maintaining a good credit score, reducing your debt, saving a huge down payment, opting for longer tenure, and more.
3. It is possible to get 100% home loan?
No, it is not possible to get a 100% home loan. According to the RBI’s guidelines no bank is eligible to offer a loan of up to 100%. However, you can avail 90% of your property’s value as home loan.