Many individuals dream of having a home. However, owing to the soaring prices of real estate, just a few percentages of individuals can meet this dream. However, the rising popularity of home loans has made many turn towards it.
However, is it very easy to avail an HDFC Home Loan or home loan from any other lender? ‘No’ is the answer. Lenders have laid down various strict eligibility requirements. You will require enhancing your home loan eligibility to qualify for the home loan.
Top ways to enhance your eligibility for a home loan –
Opt for higher repayment tenure –
The loan repayment tenure is important for deciding your eligibility for a home loan. A higher repayment tenure infers lower EMIs. And it is simple to repay the debts when they are not putting a lot of stress on your finances. The higher repayment tenure also endows lenders with the impression the probability of home loan default is less. As an outcome of the lower risk, the loan approval chances are also high. There are few other benefits of holding a higher repayment tenure. It endows you with repayment flexibility and a few add-on tax benefits.
Borrowers with lower income who select a shorter repayment tenure find themselves in one of the 3 scenarios –
- Home loan disbursal at a high rate of interest.
- Inadequate loan proceeds.
- Rejection of the application for a home loan.
To understand this concept of higher repayment tenure, let’s go through the below example –
In the table below, 2 home loans are given with the same value and interest rates but distinct repayment tenures.
|Parameters||Home Loan (1)||Home Loan (2)|
|Loan proceeds||Rs 40 lakh||Rs 40 lakh|
|Rate of interest||9 per cent p.a.||9 per cent p.a.|
|Repayment tenure||8 years||15 years|
|Monthly Installment||Rs 58,601||Rs 40,571|
|Overall Payable||Rs 56,25,678||Rs 73,02,719|
|Interest Payable||Rs 16.25 lakh||Rs 33.02 lakh|
As per the table, the EMI difference between loan (1) and loan (2) is around Rs 18,000. But can you view the difference in the interest payable amount? If you select loan (2), you will require paying an additional Rs 16.77 lakh in the form of interest constituent. Thus, pick the repayment tenure that will assist you in receiving approval while even remaining within the budget. You can use the HDFC Home Loan EMI Calculator or the online home loan EMI calculator of any other lender for the calculation of interest savings.
Apply for a joint home loan deal –
A joint home loan is one of the best options if you believe you do not mitigate the lender’s minimal eligibility. As per this arrangement, the joint income of both applicants is considered. A co-applicant can be your parent, spouse, or any close relative. The sole criteria here is that the addon applicant must have a steady income source and strong credit history. Joint home loan perks are not confined to increasing your home loan eligibility chances. In fact, there are more –
- Joint home loans provide higher tax benefits. Based on the scenario, both applicants can file separately for tax exemption. Section 24 and Section 80 C of the IT Act deal with the home loan.
- If your spouse is the co-applicant for the home loan and co-owner of the home, you can enhance the home loan benefits or advantages. Women co-owners are basically eligible for a special rate of interest.
- In a joint home loan, both the home loan applicants are accountable equally for meeting the dues. Thus, it considerably takes away a huge debt burden.
Clear your existing debts –
Requirements for home loan eligibility are stricter. Lenders are cautious about lending to someone having multiple outstanding debts. Multiple outstanding debts suggest home loan borrowers may face difficulty repaying their outstanding dues in the future. As an outcome, ensure to repay the debts before applying for the home. Consider opting for the debt consolidation option if you have various outstanding debts with a high rate of interest. Clearing the dues before raising an application makes you highly credible and permits you to acquire a loan with ease.
Working on ameliorating the credit history –
A credit report is basically the key to unlocking a low-interest rate home loan. A credit report is formed post considering different parameters. A few of the parameters include debt repayment history, a transaction in older accounts, existing dues, and a few others. A lender is not likely to approve your loan if you hold a low or zero credit history. Generally, a credit score equaling 750 or above is looked upon as suitable for getting a home loan deal. Anything below this makes your credit profile riskier. Thus, you must work on ameliorating your credit score or history to increase your eligibility for a home loan.Listed below are a few of the most crucial ways to improve your credit score –
- Set a reminder and repay your loan EMI by the due date.
- First-time applicants must look for a consumer durable loan, short-term loan, or credit card to form their credit score.
- Ensure to clear off your loan defaults, if any.
Declare all of your income sources –
To have a diverse income source is no longer looked upon as a luxury. Now it is a need. Many people believe that while examining credit, lenders just examine your basic income source. However, it is a major myth. The more income sources you have, the better your chances of securing a home loan. You should furnish evidence of a secondary or additional income source to ameliorate your home loan eligibility. Few common secondary income sources involve earning from your part-time business, rental income, freelancing and others. Earning a secondary income also makes you eligible to avail a higher home loan amount.
Enhance your down payment proceeds –
Even if whole home loans are secured, lenders require keeping the disbursement low to reduce their credit risk. Here is where paying a higher down payment from your pocket may enhance the lender’s trust in you and increase your chances of getting your home loan approved.