Securing a home loan can be a significant step towards owning your dream home. There are a number of financial institutions in India, both banks and non-banking financial institutions that offer significant loan amounts to help you accomplish the most significant milestone in your life. However, the home loan approval process involves various factors, including your eligibility. To improve your chances of getting a home loan and getting favourable terms, it is essential to take proactive steps. All lending institutions have a thorough eligibility checklist that applicants must meet for a home loan approval.
This home loan eligibility checklist includes your credit score, income, employment status, and age to minimise lending risks for financial institutions and ensure fewer defaults. Those who fall short of these eligibility parameters can still apply for a home loan – they simply have to work to improve their home loan eligibility before they do so.
Why should you improve the eligibility factors?
Home loan eligibility criteria protect the lending organisation against potential defaulting risks. Firstly, if you meet the eligibility criteria, it may qualify you for a larger loan amount. So, you can afford an expensive property at a prime location without worrying about a lack of funds.
Secondly, improving your eligibility can get you more pocket-friendly interest rates. Paying lower interest on the principal sum lowers the cost of borrowing in the long run and ensures heavy savings. You can use the saved amounts for investment purposes to fulfil other life goals and secure your retirement.
Lastly, boosting your eligibility for the loan will ensure quick approvals. Working on your eligibility before applying will simplify the approval process, giving you much quicker access to the loan amount. Not to mention it will keep you at ease during the home-buying process knowing you have high eligibility.
Top 5 ways to improve your home loan eligibility
You do not need to panic if you do not meet the eligibility criteria for a home loan approval. Here are a few simple ways to boost your eligibility, and get the money needed to finance your dream home.
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1. Boost your CIBIL Score
Every lender scrutinises your credit score before deeming that you fit for a home loan. A high credit score of 750 or above signifies a healthy credit record, lowering the risk for the lender. As a low-risk borrower, this makes you eligible for lower interest rates and a higher loan amount.
Paying your credit card bills on time and avoiding missed or late payments can help boost your CIBIL Score. Similarly, capping your debt-to-income (DTI) ratio at 35% is also wise. DTI is a commonly used metric to assess an individual’s ability to manage additional debt and make timely repayments. A high DTI ratio means lower disposable income, holding back your eligibility for a high-value home loan. To manage this ratio better, you can review your credit utilisation levels, clear outstanding loans, and pay off all other debts/dues before applying for a home loan.
2. Apply with a co-applicant
Adding a co-applicant to your home loan application enhances your eligibility for the loan. So, opting for a joint home loan may be more sensible if you have an earning family member with a good credit score. The additional income boosts your EMI affordability, necessarily qualifying you for a higher loan amount.
While co-applicants are generally spouses, you can also opt for a joint home loan with your parents or siblings. Moreover, some lenders even consider clubbing the entire family’s incomes to boost eligibility for a high-value loan at pocket-friendly interest rates.
3. Opt for a longer repayment tenure
A longer repayment tenure allows you to keep EMIs manageable while also significantly improving your chances of securing a better home loan amount. Choosing a longer tenure means you will have a longer duration to budget your repayments and close the loan on time.
However, on the flip side, a longer tenure attracts higher interest rates on your loan.
4. Make higher down payments
Making home loans more affordable, RBI mandates that lenders can finance up to 90% of the LTV (loan-to-value ratio) for properties under Rs. 30 lakh. While the bank offers this sum, the rest has to be covered by you with a lump-sum down payment. But looking at this realistically, your home loan eligibility might possibly be questioned if you plan on borrowing the maximum loanable amount.
Lenders generally prefer borrowers who can make a sizable down payment since this reduces the total loaned amount, thus, reducing the risks of defaults. So, you should consider paying off the down payment with investments like FDs or other options like SIPs.
5. List all your additional income sources
Since your income determines your repayment capacity, lenders assess it as a primary eligibility criterion for sanctioning home loans. High income and multiple sources of income assure lenders that you will meet EMI payment due dates and diligently repay the loan. Listing down your add-on sources of income helps boost your home loan eligibility since it proves your capacity.
For instance, if you are a salaried employee with rental or freelance income, you should add it to your home loan application. This will immediately bump your income eligibility, qualifying you for a higher loan amount.
Improving your home loan eligibility can bring you more favourable loan terms. It can help you get better interest rates, enhance your borrowing capacity, and boost your long-term credit history.
While you should execute these tips to improve your home loan eligibility, picking a lending institution with lenient eligibility criteria also helps. Making home loans more accessible, Bajaj Finance has a simplified and easy-to-meet eligibility checklist.You can also check your eligibility through Home loan eligibility calculator provided by Bajaj Finserv. You should be good to go if you are a self-employed or salaried individual with a CIBIL Score of 750 or above and a stable income. While you will also need to meet certain basic age and work experience parameters to qualify for the loan, this checklist is as easy as it gets. With Bajaj Finserv Home Loan, you can get a loan of up to Rs. 15 crore at an interest rate starting from 8.50% p.a.