6 Smart Tips to Increase Your Home Loan Eligibility

Home financing is an important step in the process of owning a home. To obtain approval for a Home Loan, one must meet specific criteria set by banks or financial institutions. By comprehending these factors, you can improve your chances of approval and potentially secure better terms for your loan. This article outlines practical approaches to boost your eligibility for a Home Loan, resulting in a seamless homebuying journey. 

Effective Ways to Increase Your Home Loan Eligibility

1. Apply with an Excellent Credit Score

Your credit score reflects your creditworthiness as well as your repayment capacity. An individual's credit report is created based on past repayment behaviour, current debt obligation, income status, etc. If you have never missed paying any EMI and have always been a responsible credit user, your attitude towards credit will reflect positively on your credit rating.  

When you apply for a Home Loan, the first thing that your lender will do is approach a credit bureau to get access to your credit rating. Lenders generally require borrowers to have a CIBIL score of 750 plus to be eligible for a Home Loan. If your CIBIL score is lower than this, work on increasing and maintaining a good credit score.  

2. Make a Higher Down Payment

Lenders sanction anywhere between 75% to 90% of a property's value as a loan. The remaining amount, known as a down payment, must be arranged by the borrower. When a borrower makes a sizeable down payment, their Home Loan eligibility may increase significantly. 

3. Opt for a Longer Tenor 

If your current Home Loan eligibility is low, you can increase it by opting for a longer tenor. When you increase the loan tenor, you increase your total interest outgo but make your EMIs feasible.  

4. Pay Off Some Loans

As mentioned before, lenders want to loan money to low-risk candidates. Anyone who already has multiple loans running may find it difficult to avail of another loan and pay EMIs for it. Thus, to increase Home Loan eligibility, borrowers with multiple loans must apply for a Home Loan after clearing a few existing loans.  

Further, borrowers must also always keep their FOIR or fixed obligations to income ratio, which is a ratio of one's fixed monthly outgo to one's net income, under 40%.  

5. Declare Additional Sources of Income

As discussed earlier, lenders check an individual's income status to gauge their repayment capacity. If you think, your monthly income isn't enough to convince your preferred lender that you can repay the loan you wish to avail of, you can increase your loan eligibility by disclosing all additional sources of income in your Home Loan application. These would include income from a part-time job, rental income, interest received on FD, the payout from mutual funds and other investments, etc.  

6. Add a Financial Co-Applicant 

One of the easiest and best ways to increase Home Loan eligibility is to add a financial co-applicant to your Home Loan application. This co-applicant should be someone with a regular source of income and a high credit source.  

When you add a co-applicant to your Home Loan application, your lender will consider your combined repayment capacity for Home Loan approval. This will not only increase your chances of Home Loan approval but also might increase the value of the Home Loan amount you qualify for.  

Conclusion  

Opting for a Home Loan is a smart way to become a homeowner. A Home Loan allows you to purchase your dream home without exhausting your savings and helps you save more money each year by way of Home Loan tax benefits. If your Home Loan eligibility is low, follow the tips shared in this article to increase your Home Loan eligibility and avail of a Home Loan on favourable terms and conditions.     

Read Also: How to Calculate Home Loan Eligibility?