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Tips That You Should Follow to Increase Home Loan Eligibility

by anveshajain

Home is where love, hope and dreams begin. A dream abode is on everyone’s checklist, and it is a crucial milestone for a family. If you are also looking to tick your checklist, then this article is a must-read for you. 

Before finalising your home, it is imperative to understand your home loan eligibility to understand if you should proceed with the purchase. 

How Much Home Loan Can I Get on My Salary?

Home loan eligibility is the maximum loan amount offered to you based on your age, salary, credit score, age, qualification and other commitments. Lenders offer a home loan that is 60 times your in-hand salary.

You can check your home loan eligibility utilising your lenders’ home loan eligibility calculator to understand the loan amount you are eligible for. The calculator considers factors like income, tenure, and other obligations to tell you your eligible amount. Calculating eligibility before applying for a home loan is important to understand if you can afford to buy that dream home.

But what happens if you cannot meet the eligibility criteria and are eligible for a lesser amount of home loan?

In such cases, you can follow these tips to increase your home loan eligibility significantly. Let’s explore them.

Tips That You Should Follow to Increase Home Loan Eligibility

Clear Out All Existing Loans

Since home loans involve a lump sum, any existing dues will impact your home loan eligibility. The lenders look at a fixed obligation to income ratio (FOIR) to sanction loans. It encompasses the application obligations like current EMI’s, existing loans etc., to determine eligibility. A lender will sanction loans to individuals with a FIOR of up to 60%. If your FIOR percentage exceeds this limit, you can lower it by clearing off your existing debts. Lower FIOR indicates lower liabilities enabling the lender to sanction you increased loans.

Go For a Step-Up Home Loan

Step-up home loans are excellent for individuals in their 30s and 40s who require a higher loan. As the name suggests, step-up loans increase with time. The EMIs are low for the initial few years and gradually increase with the income of the borrower. Step-up loans help you repay loan tenure without having to shoulder the financial stress of higher EMI.

Step-up loans increase eligibility because the EMI’s are lower in an initial period which helps the bank trust you to give the loan. If the EMIs are equal, it would be difficult for you to meet the FOIR ratio required to take the loans.

Extend Your Home Loan Tenure

Longer tenure reduces the monthly EMI’s. It convinces your lender that you have enough time to repay the loan. This way, the lender will consider increasing your loan eligibility.

Maintain A Credit Score Above 700

CIBIL scores play a vital role in improving your loan eligibility as well as reducing your interest rates. Credit scores are calculated based on your regularities in loan repayments and credit card payments. Most home loan lenders require a minimum CIBIL score of 700 to consider an applicant. 

High CIBIL scores impact your loan sanctions and loan offers positively. If you default on any loan installments or apply for too many loans, it will negatively impact your credit scores. Lower credit scores lead to lesser eligibility of a home loan or even rejection because the lender considers you as a risky candidate. 

If you have low credit scores, you can also check your credit report for errors to understand the issue. You can always improve your CIBIL score by paying your dues on time and in full. Avoid too many small debts as it leads to defaulting loan installments. 

Opt for a Joint Home Loan for Higher Eligibility

You can avail of joint loans with your spouses, siblings or patients. Joint loans are one of the best ways to improve your home loan eligibility. In such cases, the cumulative monthly income is considered for loan sanction, making you eligible for a higher loan amount. The joint home loans come with tax benefits that the co-applicants can share along with the repayment burden.

Additional Income Source

There are many income sources you can show to increase your eligibility. The additional income source could be rental income, income from a hobby, mutual fund dividends, fixed deposits etc., to increase your eligibility for the home loan.

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