Buying a home is a dream come true. But the home purchase journey is exhaustive; the right place and its potential to grow, suitability, choosing the right architect and builder, and so on. It may not be possible to handle the whole expense with your savings. You may need to apply for a home loan.
Applying for a home loan involves intense preparation. The borrower must decide on the lender, checking their interest rates and clauses— there is much to do.
In this article, you have a complete guide to increasing your home loan eligibility to get approval on the home loan on your first try.
Adding a Co-Applicant can Increase your Chances
The chances of a loan increase if you apply for it jointly. The joint incomes facilitate a quick approval of the home loan.
The co-borrower should also be the joint owner of the house. All joint borrowers share the burden as they have an equal liability to repay the loan amount.
The plus point in including a co-borrower is the clubbing of incomes that raises the monthly income limits. That makes them eligible to borrow a larger amount.
Work to Raise your Credit Score
Your credit score reflects your credit history and lender grant loans depending on it. The lenders also segregate the prospective borrowers on the credit score criteria and decide the interest rates accordingly. A high credit score (above 750 on a scale of 300 to 900) indicates a lower risk and will receive a home loan at a lower rate.
Individuals can increase their credit score by paying their credit card dues on time. Despite having a credit card, if the holder does not use it at all, then the credit score will come down. The best way for credit cardholders to raise their credit score is to use only up to 30% of the credit card limit.
Repay Old and Existing Loans
When you clear your old and existing debts and show additional sources of income, your debt-income ratio will shrink, and you will be eligible for a higher home loan.
Open an Account with a Preferred Lender
Borrowers must plan their home loans and open an account with the lender at least a year before applying for it. That will give you 12 months to transact with the lender and build a lasting relationship. If the lender can trust you, he will increase your eligibility, and the lender may offer you a larger amount home loan at lower interest rates.
Declare your Sources of Income
Your ability to earn more income indicates that you can repay the home loan. Disclose all your income sources to increase your chances of securing a loan.
Choose a Longer Tenure
If you choose a longer tenure for the loan, it gives you a longer period to repay, and the lenders feel that it is less risky for them to grant it to you. But an important point to remember is that the loan will be expensive for borrowers as they must pay interest for a longer tenure.
No borrower wants the lender to reject their home application. A rejection could bring down your credit rating and scare other lenders from offering you a home loan. That is why you must complete all formalities carefully to increase your home loan eligibility to avoid rejection.