With the RBI keeping its repo rate unchanged at 4% in 2021, financial institutions have also decided to offer housing loans at a reduced interest rate.
However, accessing the credits requires fulfilling certain parameters set by lenders to remove credibility concerns. These criteria usually include credit score, financial security, income stability, age, a healthy debt to income ratio, etc. Clearing these parameters would help an applicant acquire considerable credits against reasonable interest rates.
Here are some tips that would help potential applicants enhance their housing loan eligibility with ease.
How to increase home loan eligibility effortlessly?
- Show multiple income sources
Having a strong financial backup is always a positive sign when it comes to availing credits. Since lenders are at risk of default when sanctioning substantial credits, they require borrowers to ensure that they have the ability to repay the advance availed. Showing multiple income sources is, thus, a smart way to leverage home loan eligibility.
In this regard, showing the surplus gained through investments, projects, assets, fixed deposits returns, etc., can be beneficial. Submitting the documents to testify these income sources can help substantiate the claims.
Applicants, thus, need to research well on home loan eligibility and documentation for hassle-free borrowing.
- Apply for a joint loan
It is understandable that maintaining a high credit score is not easy for everyone. There are times that the home loan application gets rejected due to eligibility issues. When facing such situations, applicants can take the help of a co-applicant.
Applying with a spouse or a family member increases loan eligibility. In addition, the presence of a guarantor with longer workable years and a 750+ CIBIL score assures a lending institution regarding timely repayment.
Individuals can apply for a home loan with a co-applicant to initiate better loan management as the EMI and interest outgo are divided equally among each applicant. In this regard, a female co-applicant or property owner doubles the home loan tax benefits. Moreover, the stamp duty charges on the same also reduce significantly.
- Choose a shorter repayment tenor
Housing loan applicants receive the flexibility to choose the preferred tenor. Opting for a longer tenor helps to reduce the EMI payments. This reduces the EMI outgo and relieves the strain on monthly disposable income.
However, selecting a longer tenor option increases the total interest outgo. It is, therefore, advised for borrowers to choose a shorter tenor to reduce their total interest payment. Choosing a shorter tenor also boosts the borrower’s eligibility to avail the advance.
- Reduce the Debt to Income ratio
DTI or Debt to Income ratio plays an efficient role in influencing an applicant’s housing loan eligibility. This factor helps a lender understand an individual’s capability to avail an additional loan without straining his/her finances. In this regard, a 40% or lower DTI would leverage a borrower’s credibility. In addition, one can prepay existing loans to balance the ratio.
These are some of the proven factors that can help improve an applicant’s housing loan eligibility. In addition, an individual should keep the documents showing timely repayment handy as this would build trust in a lender’s eye.
- Improve CIBIL score
Credit history and CIBIL score are the two vital factors that assess an individual’s housing loan eligibility. Maintaining a healthy CIBIL score reassures an applicant’s repayment capability and removes the defaulting risk.
Usually, lending institutions give weightage to individuals maintaining a 750+ CIBIL score and a remarkable repayment history. A healthy credit score also offers the borrower negotiating power regarding interest rate reduction and aids in availing a substantial loan amount.
In this regard, potential borrowers can implement certain ways to improve their creditworthiness. For example, making prepayments, clearing outstanding debts, updating credit reports, etc., are smart ways of credit score improvement.
For a streamlined process, one can utilise a home loan eligibility calculator and determine the areas to work on.
Further, one can find reputed HFCs offering pre-approved offers that make the loan application swift and hassle-free. Such offers are usually levied on credit forms like LAP, home loan, etc. Individuals can check their pre-approved offer by providing their name and contact number.
Apart from undertaking measures to increase loan eligibility, keeping track of the parameters set by the respective lending institution is crucial before applying. It is also important to choose the lender that offers better terms, effective service and most importantly, simple eligibility.