Know How to Improve Your Home Loan Eligibility
Home Loans are a necessity no matter you are employed in a job or are self-employed. In-fact considering the average monthly income in India, unless you are running a hugely successful business or want to buy a home in some remote area, the process requires everyone to take out a Home Loan. But what if your bank is not willing to lend you as much amount as you need?
Here are a few tips to improve your Home Loan Eligibility.
Choose a longer tenure loan: This is the simplest way to improve your Home Loan eligibility. Banks account for a number of factors when deciding to lend you for buying a new home. One factor is the duration in which you intend to repay the Home Loan. Most people choose a tenor of 15 years, but if you are young and have around 25-30 years of working life before you retire, you can consider a longer period, say a 20-year Home Loan. This will bring down your monthly repayment and shoot up your Home Loan eligibility by a significant margin.
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Get a co-borrower: If you are trying to get a Home Loan on your own, you might not be able to get the exact amount of money that you want. Your income may not be enough to meet the lender’s criteria. In most cases, the lender would not want you to pay more than half of your income as the EMI for a loan. This is where getting a co-borrower helps a lot.
A co-borrower is a person who becomes jointly responsible along with you for the loan instalment repayment. Your wife or an earning parent can become a co-borrower. Take, for example; your SBI Home Loan Eligibility can be improved up to 75% by adding a co-borrower. Banks will club your income and the income of your co-borrower to assess the eligibility. The EMI outgo of your combined incomes can reach up to the requisite income threshold for the loan you seek.
Get rid of other debt: Banks loan the money for your new home based on how much you can pay as an EMI. If you are already paying other installments such as a Car Loan or a Personal Loan or Credit Card EMIs, this will restrict your disposable income, which can be counted by the lender as available for the repayment of your Home Loan. In such a scenario, there is a way out. You can use some of the money you have kept as a downpayment of your home for clearing off those other loans in advance.
You will, of course, have to increase your Home Loan amount to cover for the new reduced down payment, but this brings in a two-fold advantage. SBI Home Loan Interest Rates are much lower than their other debt products. If done properly, you will have a much lower interest rate on the amount of those other loans, and now that your Home Loan has subsumed all other debt, you will have a much more extended loan tenor to repay the overall amount.
Show more savings: Not many people realise this, but if you can show some extra savings, banks will be able to lend you more. If, for example, you only give the salary account statement as asked by the bank as income proof, they will think that you live paycheque to paycheque. The fact is, no one uses their salary account as a savings vehicle. Everyone sends their savings to Recurring Deposits, Fixed Deposits, PPF Accounts, NSC, or stocks through Demat Accounts.
If your bank loan executive says that they cannot lend you the amount you want, check with them the process to show savings. Yes, the life insurance policy that you took out for tax saving last year will also contribute to your Home Loan eligibility improvement because banks consider it as a saving. Similarly, that Employee Provident Fund, which takes away a few thousand from your salary every month, check its statement! It would have gathered a handsome amount by now. Show that money saved in your EPF account, and the banks will be happy to lend you more.
Open an account with the lender: If you are trying to get a Home Loan from a bank, giving them an improved overall business volume will definitely increase your loan eligibility. Open an account with the bank and move in a substantial amount of money you will use as a down payment into that account. Let that money be there for some time and earn interest for a cycle or two. This is a great way to let the bank know that you have a sound financial background and will not be unwise in your financial dealings.
If you can get a Salary Account with the same bank, all the better! This way, the bank will be sure that you have a stable job with a regular source of income. Another way to get the bank to increase your loan eligibility is to open a fixed or a recurring deposit with them. Banks consider these as long-term investments. They will be more than willing to lend you money if they see that you have investments with them and have entrusted them with long term savings.
Improve your CIBIL score: This is more of a long-term process to increase your Home Loan eligibility. Actually, from the very first day, you start using credit, be it in the form of a Credit Card, or a Personal Loan or Car Loan or any other debt instrument, ensure that your EMI payments are prompt and timely. Do not default on any loan. Do not reach out to a bank and tell them that you cannot pay back your loan and want them to settle the debt. Even the smallest red flag on any loan on your CIBIL report will bring down your Home Loan eligibility by a significant margin. On the other hand, if you are wise in using credit and maintain an excellent credit score of more than 800, banks will be open to pushing the envelope and lending you a bit extra.
Finally, you can always shop around and haggle for better home loan eligibility. Salespeople have to match their business volume targets. If you tell them that other banks are willing to lend you more, they will most certainly help you strike a better deal with the lender.
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