Ways to enhance your home loan eligibility
So, you have decided to take a home loan. What are the steps to apply for it? The first one indeed has to include checking your eligibility. This ensures you know exactly what to expect going into the process.
Banks and financial institution assist you in this by providing a home loan eligibility calculator on their websites. It is a free tool available to know your affordability based on your age, income, employment status, etc. You get instant results through it that act as guidance for planning your loan application. It is also an opportunity to enhance your eligibility.
Here are some of the ways to do it:
Settle existing debts: When you have a good debt-to-income ratio, you have higher chances of getting your loan approved. It is one of the parameters lenders consider while they calculate home loan eligibility. Therefore, ensure to pay off your existing loans for loan approval. Proper planning months before your application helps you in clearing such debts in time.
Improve credit score: The recommended credit ranking for availing of house loans is above 750. It is a prime factor that impacts the loan amount, interest rate and tenure you get. It is an indication of your repayment capacity and financial standing to the lenders. Hence, it is best to check it before application and fix any discrepancies.
Go for a longer tenure: If you think you can repay better with lower instalments, this route provides you with increased flexibility. Your home loan eligibility, therefore, improves as you can afford the lower EMIs. However, this also leads to a higher home loan interest rate that increases your overall loan cost.
Add income sources: Your income does not have to get limited by your salary or business revenue. Adding other sources like investment returns, dividend, fixed returns, variable pay, rental income, etc., is a good idea. You could also consider budgeting and other surplus savings to increase your monthly affordability. This depicts your financial strength to the lenders, and they evaluate your eligibility for home loan on the same.
Apply cautiously: It is best to shortlist lenders based on your financial needs before submitting your loan application. This is because each application gets updated in your credit report, accessible to prospective loan providers. It also impacts your credit history either positively or negatively based on the approval status. To safeguard your home loans eligibility, you should only apply when you qualify and after scrutiny.
These methods are effective when you plan before you apply for the loan. It gives you ample time to know if you qualify and improve for the same. It is also a great way to compare lenders and get the best deal.