A lender considers several factors while evaluating a home loan application. These include the applicant’s age, income, property characteristics, as well as their repayment obligations. If the applicant does not match the cut-off set by the lender, their application could get rejected.
Here are 5 smart ways in which an applicant can improve their home loan eligibility:
- Get a co-applicant while applying for a home loan
If a loan applicant has a low credit score, insufficient income, or high EMI obligations, they might face a problem in getting their application approved. However, they can boost their home loan eligibility by including a family member as a co-applicant. Their co-applicant should have a stable income and a decent credit score. Having a co-applicant will improve the chances of getting their loan application approved. The lender might even increase the applicant’s eligibility of getting a bigger loan amount. Some lenders even provide a lower interest rate if the co-applicant is a female.
- Make a higher down payment
RBI permits lenders to offer housing loans covering 75% to 90% of a property’s value. The remaining proportion has to be covered by the borrower as a down payment. Most borrowers try to get the maximum amount covered in order to make a minimum down payment. However, making a higher down payment can be beneficial for a borrower, as the home loan EMI payments would be smaller. Making a higher down payment also means reduced credit risk for the lender, which makes it possible for them to offer the borrower a lower home loan interest rate.
- Choose a longer repayment tenure for the loan
Going for a longer repayment tenure will help in lowering a borrower’s EMI payments and increase their loan eligibility. However, please note that doing this would increase the total cost of the loan given the interest accumulation over a longer tenure. This is why a borrower should always use a home loan EMI calculator before choosing a repayment plan. To save on interest, borrowers can make prepayments, which will help in saving the total cost of their home loan.
- Maintain a good credit score
A credit record is one of the most important factors that will determine loan approval. Lenders consider a credit score of 750 or above to be a good score and this can help an applicant get a lower interest rate on their loan. This is why it is considered best for one to review their credit score at least once in three months.
- Consider various home loan plans
There are many home loan offerings that differ in interest rates, processing fees, loan tenures, and so on. Hence, it is important for a borrower to review various housing loan plans and then make an informed decision.
Also, one should always keep in mind their financial capacity of repaying the loan. It is advisable to speak with a financial advisor before applying for a home loan.