Banks broadly evaluate an applicant’s profile to determine their eligibility for a home loan. Factors such as the current Income, CIBIL score, credit history, age and location of the applicant, sources of income, existing loans, etc., are considered before sanctioning any loan. When the disposable income is lower, the chances to attain a higher home loan reduces. However, by using one or a combination of the following tips home, eligibility can be increased:
Clear existing loans:
The first step to availing of a higher home loan is to settle existing loans or debts. The debt-to-income ratio refers to the percentage of monthly income spent on the payment of debts. By paying off existing loans, you can improve your debt-to-income balance. This is one way to improve your CIBIL score.
Build on the CIBIL score
The CIBIL score represents the creditworthiness of an applicant. Therefore, it is essential to have an excellent CIBIL score. Apart from clearing existing loans and regularly paying off your EMI and credit card dues, you must maintain a low CUR (credit utilization rate). Generally, it is recommended that your CUR must be within 30%. However, most financial experts suggest that anything above 10% can hinder an excellent credit score. Also, check for errors in your credit report. Please rectify all disputes from your end to avail a good credit score before applying for a home loan.
Add a co-applicant
Here’s one of the most popular ways of increasing one’s home loan eligibility. You can add your spouse or an earning family member with a good credit score as a co-applicant. Doing so will substantially increase your eligibility. Moreover, if you take a joint loan with your spouse, you can split the repayment burden while enjoying additional tax benefits.
Apply for a longer tenure of loan
Although this tip isn’t ideal, applying for a longer tenure will significantly reduce monthly dues. The total interest outgo is much higher when you opt for longer home loan tenures. Nonetheless, this is an excellent tip to follow for those with lower monthly incomes since the EMI on longer-tenured home loans is notably lower. This will enhance your chance of timely loan repayment and thus increase your eligibility.
Declaration of additional sources of income
If you have multiple channels of generating income, you’re in a better position to gain a higher amount of home loans. If you own a second home, you may rent it out and declare it as an additional source in your monthly cash inflows. You must ideally mention all the different sources of income in your loan application, including dividends or interests you receive on investments. The debt-to-income ratio is only enhanced by declaring these sources, and this indicates your higher repayment capacity.
Choose a step-up Home Loan
Young professionals usually struggle to pay higher EMI dues. However, they can afford to pay off higher dues later as they succeed in their career. Step-up loans enable applicants to pay lower EMIs for the initial years and then gradually increase later. The lender evaluates the current profession of the applicant and its scope.