The economic instability in the country in 2020 has forced housing finance companies (HFCs) to adopt stringent eligibility norms to limit NPAs. While many individuals had been shown the door, business owners also faced the heat due to irregular or low cash flow. Many borrowers also opted for a moratorium. All these together have cost a borrower’s home loan eligibility for a home loan.
Prospective borrowers cannot avail a home loan unless deemed eligible by lenders or HFCs. In this regard, individuals can use a home loan eligibility calculator to assess how much they can borrow based on their income, age and other related factors.
Keep in mind that home loan eligibility also depends on the kind of property one is about to purchase, its location and much more.
How to increase home loan eligibility?
To avoid facing rejection from lenders, borrowers can take a few steps to increase their eligibility. Borrowers must check home loan eligibility after considering the following factors –
- Maintain a credit score above 750
A credit score is one of the most crucial factors determining a borrower’s creditworthiness for home loan eligibility. Timely repayment of existing loans helps in improving the credit score. A credit score above 750 is the ideal scenario. Anything below 750 may lead to a rejection of the home loan application. A good credit score also determines the EMIs apart from deciding the approval or rejection of a home loan application.
- Repay debts religiously
Pre-paying existing loans raise the chances to increase home loan eligibility. HFCs or reputed home loan providers may offer higher interest rates to applicants who have not cleared their dues.
- Add co-applicants
In case of low eligibility, individuals can opt for a joint home loan by adding their working spouses as co-applicant. A joint loan increases the chances of a higher sanctioned credit, lowering the chances of default.
- Open an account with the chosen home loan lender
It is wise to open a savings account with a chosen lender on the completion of market research. It builds a relationship with the lender while increasing one’s chances for home loan eligibility.
- Declare additional income sources
Adding other sources of income, such as rental income, part-time business income, fixed freelance income, and likewise enhances an applicant’s loan eligibility.
- Choose a longer tenor
Opting for a longer tenor directly increases applicants’ home loan eligibility. It also increases the on-time loan repayment while lowering the chances of default. Long tenor equals lower EMIs but also leads to increased interest outgo.
- Opt for step-up loans
Prospective home loan applicants with lower monthly income can opt for step-up loans. Lenders offer loans at a lower EMI in the initial years and gradually increase it, providing borrowers the much needed time.
Home loan applicants can also look for pre-approved offers extended by reputed housing finance companies. These not only streamline the process but also minimise documentation. Such offers are extended on several financial products like home loans, loan against property and more. Applicants can check their pre-approved offer by submitting their name and contact information.
Applicants must understand that a home loan is a long-term investment that needs the commitment to repay without default. Irrelevant or numerous loan enquiries may affect such scores adversely. Home loan providers are always on a search for applicants with a good credit score. Following these simple tips can help you to increase your home loan credibility with ease.
