If you are planning to buy a home, it’s important for you to analyze how much funds you would be putting from your own pocket and how much loan would you be taking from a bank. There is a maximum limit on how much a bank can lend you for buying the property and it varies on a case-to-case basis.
Your home loan eligibility depends on a couple of factors and this article talks about the 5 most important tips to increase your home loan eligibility.
- Improve your CIBIL Score
The CIBIL Score is a score which basically indicates your Credit History as to how likely it is that you repay your debts on time. If this score is high i.e., more than 750 – it indicates that you have a very good credit history and are likely to pay off your loans on time.
However, if this score is low – then that means that there is a high probability that you may not be able to repay your loans. From the banks, the safety of money is equally important as the interest rates and therefore they are not very keen on giving higher loans to people with low CIVIL Score.
Therefore, it is advisable for every person to keep a high credit score. The credit score can be increased by doing the following
- Always pay your Credit Card bills and EMI’s on or before the due date and in full.
- Don’t apply for too many credit products at once as each application leads to a new credit score check which reduces your score.
- Try to keep a low Credit Utilization Ratio of around 20-30% of your credit card spending limit.
2. Opt for Longer Tenure Home Loans
One of the major factors which determine your EMI payable is the duration of your home loan. The longer the duration, the lower would be the EMI payable. And the lower the EMI payable, the easier it would be for you to repay the loan.
The easier it is for you to repay the loan, the higher is the probability of the lender recovering the EMI due. Therefore, try to opt for longer duration home loans if you wish to increase your home loan eligibility.
3. Take Joint Home Loans
One of the best ways to improve your Credit Score is to apply for a Joint Home Loan preferably with a family member like Spouse, Son or Parents. In case of a joint home loan, the lenders consider the income of the other co-applicant as well which substantially increases your home loan eligibility. You can click here to read more about the documents required while applying for Home Loan: Home Loan Eligibility
4. Repay your existing Loans with Smaller Durations
Home Loans are loans with bigger durations of say 10/20 years. However, there are some loans like Vehicle Loan, Personal Loan etc. which are of 2/3 years. Try paying off such smaller durations loans before applying for a Home Loan as repaying this will increase your monthly net savings and will thereby lead to increase in your home loan eligibility.
5. Additional Sources of Income
If you have additional sources of income like Rent or Business – then that can also help you increase your home loan eligibility. Lenders do check your monthly cash flows before sanctioning your home loan and therefore the higher the monthly cash flows – the better it is.
Bonus Tip: Banks cannot sanction a home loan of an amount greater than your purchase price. And they will verify the purchase price through your purchase documents. Therefore, ensure that your purchase price is mentioned in the agreement and stamp duty is also paid on the same at the time of property registration. It has been observed in several cases that the purchase price is not mentioned in the Agreement and Stamp Duty not paid on the same which leads to lower home loan being sanctioned.