How to improve your home loan eligibility?

How to improve your home loan eligibility?

Checking your home loan eligibility criteria is a crucial step in the entire home loan process. Banks and Housing finance companies approve home loan applications of borrowers who meet their set eligibility criteria whereas those who are unable to meet the lender’s requirements may have to face rejection. But the good news is that you can enhance your loan eligibility. As a borrower, you can control and even improve your eligibility so that your home loan is approved on your first try. This can be done with the help of a few simple and logical tricks and tips. Here are a few easy ways in which you can improve your home loan eligibility.

1. Pay off your existing loans

Paying off all existing loans can help improve your chances of getting the loan sanctioned. Ensure you have no existing loans or debts when you apply for the loan. Pay off your personal or vehicle loan as well as your credit card debts, before you begin the loan application process. If you tend to use your credit card regularly, make it a habit to repay your entire credit card debt on a timely basis, so that you don’t have to pay any interest on your credit card expenses. Borrowers who are debt-free while applying for home loans are more likely to get the loan passed.

1. Pay off your existing loans

Paying off all existing loans can help improve your chances of getting the loan sanctioned. Ensure you have no existing loans or debts when you apply for the loan. Pay off your personal or vehicle loan as well as your credit card debts, before you begin the loan application process. If you tend to use your credit card regularly, make it a habit to repay your entire credit card debt on a timely basis, so that you don’t have to pay any interest on your credit card expenses. Borrowers who are debt-free while applying for home loans are more likely to get the loan passed.

2. Record your variable pay

Another way to increase your eligibility for home loan is by providing proof of your variable pay along with your income documents. Many companies provide monthly incentives and year-end bonuses to their employees, which can increase their annual income considerably. This is known as variable pay. Lenders take your variable pay into account while calculating your loan eligibility so you must maintain a record of it.

3. Work on improving your credit scores

All lenders consider your credit scores while assessing your home loan eligibility criteria and require you to provide your credit scores. You typically need credit scores of 750 to eligible for the loan. If your credit score is lower than 750, your loan can be rejected. You can improve your credit scores by paying off all existing loans maintaining a credit utilisation ratio of only 30% of the spending limit set against your credit card. Also, pay off all EMI and credit debts on time. Good credit repayment behaviour can increase your loan eligibility to a great extent.

4. Show additional income sources

If you have any additional income sources, you can show those as they can also enhance your home loan eligibility. You may have income from sources such as fixed deposits, mutual fund dividends, business income or even rental income from another property. Essentially, additional sources of income are those apart from your net monthly (in-hand) income, which you can show to increase your eligibility.

5. Opt for a joint loan

One of the best ways to improve your house loan eligibility is to apply for a joint home loan. Applying for the loan with another applicant, who is employed and can show a monthly income, can increase your chance of getting the loan passed to a greater extent. When you opt for a joint loan, lender considers the income of both applicants. You also receive a higher loan amount.

6. Opt for long tenure loans

Home loan is available for tenures of up to 25 years. When you opt for longer tenures, you are basically showing the lender that you have enough time to repay the loan. Longer tenures also result in lower monthly EMIs and the lender becomes confident that you will be able to repay the loan on time, thus reducing the lenders’ risk.

Before you apply for home loan, you should check the home loan eligibility criteria. The above mentioned tips can help you increase your loan eligibility so you should take them in account before beginning the loan application process.