5 Smart Ways to Increase Your Home Loan Eligibility Quickly


5 Smart Ways to Increase Your Home Loan Eligibility Quickly
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When applying for a home loan, either offline or online, many borrowers aren’t often aware of the documents required for a home loan approval. In addition, many of them don’t know how to apply for a home loan online, nor do they know how a home loan EMI calculator can affect their chances of loan approval indirectly.

Several factors can affect your home loan eligibility and chances of home loan approval. Therefore, it is necessary to understand the factors that make you more eligible for a home loan approval.

In this article, you will learn 5 smart and proven ways that will make you more eligible for a home loan.

1. Pay Off Your Existing Loan Debts

Any financial institution that gives out loans considers non-repayment or late repayment of loans as a red flag. No lender wants to approve loans for anyone who has no history of creditworthiness. It is, therefore, important to pay off existing loan debts as soon as possible. These also include debts on credit cards, insurance, and other personal loans.

If you have multiple loans running at the time when you require another loan, your application will most likely be rejected. Having no outstanding loans or having proof of paid loan debts at the time of another loan request is essential. It sends a positive signal to the lenders that you’re capable of paying back the loan within the agreed tenor.

Moreover, lenders also make use of the Fixed Obligation to Income Ratio (FOIR) format to better ascertain your repayment ability. This can also be referred to as the debt-to-income ratio. Using the FOIR calculation, they divide your outstanding debt by your total income and multiply the outcome by 100 to determine your loan eligibility. A low FOIR means that you have fewer liabilities, a high loan repayment capacity, and greater chances of loan approval.

2. Declare Multiple Sources of Income

Declaring your other sources of income and assets is a smart way to improve home loan eligibility and chances of approval. These sources could be from other jobs dubbed “side-hustles”, rent charges on properties, interest returns on loans, shares and dividends, investments on assets, government bonds, etc.

You can provide your income and asset declaration as part of the documents you submit to get a home loan. This will help to establish your financial situation as low risk and show the lender that you’re capable of repaying your loan.

3. Apply for a Joint Home Loan with a Co-Applicant

Applying for a joint home loan with a co-applicant, especially low-income and medium-income earners, increases the chances of loan approval. For a joint home loan, lenders consider the incomes of both applicants. Your co-applicant can be a spouse, a parent, or a sibling.

4. Maintain Good Credit Scores

Financial institutions have increasingly made use of credit scores among other variables to determine the repayment capacity of intending borrowers. Credit scores are three-digit numerical values that express your creditworthiness based on the analysis of your credit history, as obtained from credit information bureaus.

A credit score is calculated through a consideration of factors, such as payment history, debt-to-credit ratio, type of credit accounts or credit mix, length of credit history, new credit, and amount of credit.

In line with the new CIBIL grading system, many lenders grade credit using the structure below:

Score

Grading

750-900

Excellent

700-749

Good

650-699

Fair

600-649

Low

Below 600

Very Low

The higher a borrower’s credit score, the higher their chances of getting loan approval. It is also imperative to improve credit score to easily obtain home loans. How can you do this? Well, it’s not too hard. Here are some ways to maintain a good credit score:

Make your credit payments on time: Payment histories are among the biggest factors that affect credit scores. Timely payments help improve your credit score over time.

Take on credit mix: That is, have more than one credit account to improve your perceived creditworthiness. It is advisable to get more than one credit card to get an improved credit score.

Raise your credit: You should consider raising your credit limits on one of the cards you are less likely to use. This improves your credit utilization rates.

5. Go for Long-term Home Loans

Going for long-term home loans poses a great advantage to both the borrower and the lender because this means that the calculated EMI payments will be lower. If EMI payment is lower, the borrower is more likely to make timely payments, and the lender considers such a person to be of low risk. However, the downside of these home loan types is the high interest rate charged on the loan.

Final Thoughts

Now that you have learned 5 smart and proven ways that will make you more eligible for a home loan, what are you waiting for? Take advantage of this information by applying for a home loan with any of the leading lenders in the market today.

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