With a recent boom in real estate, people are more and more dependent on home loans nowadays. Even if they have the payment capacity, they still try to prefer to go for a loan. We all know that buying a house is one of the most important decisions in life, so in order to get it, housing loan eligibility is an important step first. It helps you know whether you are eligible for a specific loan amount or not.
What is home loan eligibility?
It is a set of guidelines where a bank evaluates whether the customer willing to take a loan is creditworthy or not. This overall process is essential as it helps them to check whether the customer can avail and repay a particular loan amount. The primary factors of this type of loan eligibility are monthly income, borrower’s repayment capacity, financial position etc. Meanwhile, other factors include age, credit history, score etc.
What are the best tips to increase your home eligibility?
1. Go for a longer tenure.
This helps the lender understand that the borrower has more time to repay the loan. A longer tenure definitely offers additional time to repay the loan, which results in timely payment and reduces the overall risk. So, whenever you go for a longer term, it automatically increases your housing loan eligibility.
2. Pre-pay the existing loan (if any)
If you already have a loan under your name, make sure you pay it before applying for a home loan. This is because due to the non-repayment of the current loan, the lender might reduce your loan amount or offer it at a higher interest rate which is not feasible. However, in some cases, the lender may also come across the fact that the borrower is already burdened with EMIs (Equated Monthly Instalments) and adding another loan in the bucket might result in delayed or even non-payment of monthly EMIs.
3. Declare additional income
If you have any additional income apart from your monthly salary, declare it. This is because it helps financial institutions understand that you have a high repayment capacity.
4. Choose a higher down payment.
If one goes by the facts, a bank finances a loan of approximately 75% to 90% of the property value. So if you lower the down payment, the loan value increases, and this ultimately results in higher payable interest, which is not at all advisable. So therefore, it is always advisable to go for a higher down payment to avoid a higher interest payout.
5. Strengthen your CIBIL
A good credit score always increases home loan eligibility. So, to achieve it, ensure that all loan repayments are made on time. Financial institutions usually check your credit score to determine your creditworthiness, and any delay in payments negatively impacts your credit score. Keep in mind that there is no minimum score for a home loan, but 750 and above is generally considered good.
However, if you are planning to go for a home loan, it is advisable to use a housing loan eligibility calculator first. Now, I’m not promoting any brand or organization, but just a suggestion that this calculator is available on the Bajaj Finserv application. I’ve been using this application for over a year for all my digital payments, and recently while planning a home loan, I came across this calculator. Really helpful!