Many of us dream of owning a house; it not only brings us inner happiness and a proud feeling but also makes us financially ready for unfortunate circumstances. If you are planning to buy a house for yourself or your family, chances are you must be thinking of getting a home loan. Because truth be told, not many people have that much money in their bank accounts. And even if they have it, they would not like to spend it in one go.
If you are someone who is planning to get a home loan, there are a lot of processes you should know about. And the most important among them is researching the home loan eligibility criteria. If you are a first-time buyer, you will have to read a lot about the criteria and make sure you crack them. In this article, we will talk all about what is home loan eligibility criteria and how you can get a home loan, hassle-free.
Home loan eligibility acts as a reference point for banks or lenders to find out if the borrower will be able to repay his/her loan amount or not. It also helps lenders to decide on the maximum loan amount they can give to the borrowers. Home loan eligibility is determined by several criteria like the source of income, credit score, age, family responsibilities, repayment capacity, and more. Before you decide on taking a home loan, you should ensure that all your eligibility criteria are fulfilled.
How to increase home loan eligibility
Increase your credit score
A good credit score will help you in getting a home loan. All you have to do is, make sure you pay all your EMIs on time, pay your credit card bills before the due dates, and not be on any bank’s or lender’s defaulter list. Try to maintain a credit score of 750/900 and you will be sorted. A credit score report helps your lender analyze your repayment behavior and makes their work easier. An excellent credit score not only helps you get a home loan but also gets you a loan at a lower rate of interest.
Go for a joint home loan
A joint home loan is when the loan is taken by more than one person and repaid by everyone equally. Joint home loans can be taken by immediate family members, siblings, spouses, and parents. Choosing a joint home loan not only reduces the burden on one person but also can increase your eligibility. If you have an earning family member, try to get a home loan with him/her. Also, make sure that the co-borrower also has a good Credit score. And if you have a woman as one of the borrowers, then you will be able to enjoy a lower rate of interest as well.
Repay all your existing loans
If you have an existing loan, then it can affect your home loan eligibility as well. Most lenders take into account your existing loans before offering you a home loan. If possible, before going for another loan, repay your existing loans, close the accounts, get your no-due certificate and get the same updated in your CIBIL score. This will not only increase your home loan eligibility but also reduce your financial burden.
Extend your home loan tenure
The home loan eligibility criteria highly depend on the repayment ability of the borrower every month; if you will be able to pay your EMIs on time or not. To make sure that you get full marks in this, you can go for longer tenure and reduce your EMI amount. By doing so, you also get eligible for a higher loan amount.
However, there is one problem here. Longer loan tenure means a higher rate of interest as well. So, you will have to do proper research and decide on this. To make your work easy, you can take the help of an EMI calculator which will calculate your EMI amount as per your tenure and rate of interest.
Keep your FOIR below 40 %
Now, what is FOIR? FOIR or the Fixed Obligation to Income Ratio is a parameter that helps lenders analyze your home loan eligibility. It is the part of your income that you use to repay the loan. Most financial institutions believe that a person needs at least 50% of his/her income for living expenses. So, it is advisable to keep your FOIR below 40% before applying for the loan. The higher the FOIR, the lower your chances of getting the loan. One way of reducing your FOIR is by reducing your expenses. You can also increase your source of income or clear your debts to improve your eligibility.
Additional income source
In the worst-case scenario, if you are unable to meet the home loan eligibility criteria, you can show your other income sources as well. This covers your interest earned from FDs, freelance income, rental income, or any bonus received from your employer. All of these will help you improve your home loan eligibility and bring you closer to your dream of owning a house.
Avoid job change
If you are planning to go for a home loan, try not to switch between jobs because frequent job changes can negatively affect your home loan eligibility. Try to work in one organization for at least two years and show consistency.
Choose the right lender
Your home loan eligibility also depends on a lender to lender. Some lenders do not consider the informal source of income while some do. It is always better to research and find out which lender has better in-house models for home loan eligibility.
If you follow the above steps, your chances of getting a home loan approved will increase by many folds. But make sure, you give your lender all the right information or you will have to bear the consequences.