Lenders take into consideration many elements though evaluating your home loan application. The chief amongst them are your earnings, earnings, age, remaining working age, LTV ratio, house traits and your current loan repayment obligations. Failure to match the reduce-off set by the lenders can get your home loan application rejected.
Here are 5 intelligent strategies to enhance your home loan eligibility and approval probabilities:
Make greater down payment or margin contribution
The RBI permits lenders to finance up to 75%-90% of a property’s worth via a home loan. The remaining proportion of the property’s price has to be contributed from the borrower’s personal sources as down payment or margin contribution. While most home loan applicants aim at contributing minimum down payment or margin quantity, generating a greater down payment or margin contribution has its personal rewards. Firstly, availing a reduced loan quantity would lead to smaller sized EMIs and reduced interest price. In addition to this, generating a greater margin contribution or down payment also reduces the credit danger for the lender, which in turn increases the possibility of your home loan approval at almost certainly reduced interest prices.
However, avoid compromising your emergency fund or investments earmarked for critical economic goals in your pursuit to make a greater down payment or margin contribution. Doing so might force you to take a loan at a greater interest price in the future to tackle financial emergencies or achieve your critical economic targets.
Avail a joint home loan by looping in a co-applicant
Loan applicants obtaining insufficient earnings, low credit score, greater all round EMI obligations, and so on have greater probabilities of home loan rejection. Such borrowers can enhance their loan eligibility by looping in a family member as co-applicant(s), preferably these with steady earnings and superior credit score. Apart from boosting your loan approval probabilities, adding a co-applicant can also raise your eligibility for a larger loan quantity. Looping in female co-applicants can furthermore fetch you reduced interest prices from some lenders.
Opt for longer repayment tenure
Opting for a longer loan tenure will minimize your EMI, which in turn will raise your loan eligibility due to greater EMI affordability. However, opting for unnecessarily longer tenure can raise the all round interest price of your home loan. Hence, these preparing to avail home loans should really use on the web home loan EMI calculators to uncover out their optimum loan repayment tenure on the basis of their repayment capacity and contributions to critical economic targets. Borrowers can later on make prepayments to minimize their interest price anytime they have surplus funds in the future.
Also, home loan lenders usually tend to prefer lending to these obtaining total EMI obligations, such as the EMI for the new home loan, inside 50-60% of their month-to-month earnings. Hence, home loan applicants exceeding this limit can boost their loan approval chances by lowering their month-to-month EMI obligations via a longer loan tenure.
Compare home loans delivers from many lenders
Interest price, processing charge, loan tenure and other fees connected with a home loan can differ extensively across home loan lenders based on their credit danger evaluation of home loan applicants. Hence, home loan applicants should really examine as several lenders as achievable prior to zeroing in on any specific lender.
As home loan lenders might provide preferential prices or other terms & situations to current buyers, prospective home loan applicants should very first strategy the economic institutions with which they currently have an existing consumer relationship. Then, they should really check out on the web economic marketplaces to examine the interest prices and other home loan features supplied by other lenders. This will let them to find the most effective home loan deal with the lowest interest price, optimal loan tenure and sufficient loan quantity.
Review your credit score prior to applying
Credit score is one of the very first filters factored in by lenders though evaluating a home loan application. A superior credit score, viewed as normally to be 750 and above, can enhance your loan eligibility and also fetch reduced interest price from lenders. Hence, applicants should really overview their credit score prior to applying for home loans. Doing so would enable these obtaining a reduced credit score to take expected corrective measures to enhance their credit score and then apply for a loan with an enhanced credit score.
Moreover, one should really create the habit of periodically reviewing one’s credit score, ideally at least when in 3 months. This would ensure adequate time to take corrective efforts to enhance the credit score and get the errors, if any, rectified at the earliest.
(By Ratan Chaudhary, Head of Home Loans, Paisabazaar.com)