5 Tips to Seriously Increase Your Chances of Home Loan Approvaladmin | November 30, 2020 | 0 | Finance
Acquiring a home loan can be a big ask, especially with the financial crisis looming. The post highlights five tips that can surely increase your chances of getting your loan application approved.
Loans for the home have empowered millions of individuals in calling a house their own home.
However, with the desire to own a home, the list of individuals applying for house loans has increased manifolds. This has put financial institutions to adopt strict measures to narrow down safer and reliable loan applicants.
Stricter norms mean higher chances of loan applications getting rejected which can be off-putting, to say the least. Thus, here are 5 tips that will increase your house loan approval chances:
1. Work on Your Credit Score
Your credit score, a three-digit number, released by credit rating agencies such as CIBIL offers financial institutions a metric in understanding your credit-worthiness. A low credit score will project you as an unreliable and risky applicant. Usually, a score above 750 is considered good amongst lenders and financial institutions. It is essential to track your credit score before you even apply for a loan. If your score is currently low, it could be due to many factors. Some of the most important ones are
- You have no credit history.
- You have a huge debt.
- You have missed EMI payments.
It is best to work on your score before you apply for a loan. For instance, if you have no credit history, consider applying for a credit card or a small personal loan and repaying it on time before you can apply for a bigger home loan.
2. Reduce Your Debt to Income Ratio
Lenders often look at your debt to income ratio before approving or disapproving your loan application. The debt-to-income ratio shows the current monthly EMI against the monthly income. You should aim to clear the outstanding dues to the maximum before you apply for a home loan. This includes clearing all the prior loans and paying off any credit card EMI’s. Lowering your debt-to-income ratio can not only help you in getting your application approved but can also land you a better interest rate.
3. Get a Co-applicant
A joint loan can be a great option for individuals who are not able to raise a loan based on their creditworthiness. A joint loan involves you utilising the creditworthiness of some other individual, usually a spouse, to get your loan approved. Lenders usually prefer spouse or parents, as ideal co-applicants of a joint loan. However, you must be careful regarding the payment of joint loans. Any missed premium will affect not only your credit score but also that of your co-applicant.
4. Include Your Every Income Source
Your approval of a house loan requires you to prove your ability to easily pay back this loan. This requires you to show the same on the financial statements offered by you to the lenders. It is advised to include every income source, how small it may be, in the statement submitted to reflect your potential in clearing the loan. Thus, whether it is income from rent or any mutual funds or FDs that you hold, make sure you include that in your declaration.
5. Opt for a Longer Tenure
You may end up acquiring a home loan if you opt for a longer tenure. Choosing a longer tenure reduces the EMI, which brings down your debt-to-income ratio, which further increases your eligibility in some cases. However, choosing a longer tenure also results in an increase in the total interest pay-out during the tenure.
NBFCs Can Be a Better Option
While these tips can surely help, consider an NBFC (Non-Banking Finance Company) to get a home loan. NBFCs are known to have more relaxed conditions for a home loan as compared to a bank which can help you acquire a larger home loan. However, whichever lender you choose, make sure you look for one that offers good terms and low fees and charges.