Buying a home is a once-in-a-lifetime dream for most Indians. However, it is a very costly affair, and hence, most home buyers turn to home loans to fund their dreams and make them a reality. While home loans are easily available to one and all, there are many criteria that loan borrowers must keep in mind even before applying for a home loan.
Here are seven smart tips that can help borrowers to qualify for a home loan in no time:
1. Build your credit score in advance
To be eligible for a home loan, a borrower must have a credit rating of 700+ before applying with a bank or any other lending institution. All the banks and other financial institutions will ask for your credit score, and while a score of 750 and more can improve your eligibility, a score of 700 is the minimum requirement for home loan applicants. Applicants can work on building this score by making repayments on time, clearing past dues and credit card bills, etc., from time to time.
2. Consider a co-applicant for a home loan
Home loan amounts are significantly larger amounts, and with the help of a , it is easy to check the loan amount you’re eligible to apply. Opting for a co-applicant for bigger loan amounts might just make it easier to get approval. If there are two applicants with a steady income and good credit scores, then it is reassuring for banks to offer a home loan easily.
3. Check for errors in your credit report
Your credit score is just one of the many eligibility factors for a home loan. Accredited report bureaus, like CIBIL, are approached by lending institutions for a full credit report on the home loan applicant. However, these reports may not be 100% accurate, and hence, it is crucial to get your credit report checked in detail and corrected in advance if there is an error in the information.
4. Opt for a longer repayment tenure
It is usually ideal to opt for longer loan tenure as it reduces the repayment burden on the borrower because the EMI amount per month is lesser as opposed to EMI amounts in a short tenure loan. This will help you plan your finances better and know the loan tenure that you need for loan repayment.
5. Be ready with a down payment
Banks and any other lending institutions will generally fund 80% to 90% of the property amount that you wish to buy, and not the entire price of the property. Hence, it is important to have the down payment amount ready before applying for a home loan. If you have saved a little extra or can arrange funds from other investments, then it is ideal to pay a higher down payment. This will help reduce your loan amount and make it easier to repay as your monthly EMIs, interest amount charged by the bank, and tenure will all reduce accordingly.
6. Correct your FOIR, i.e., Fixed Obligation to Income Ratio
Your FOIR is the ratio of your total outflow that is based on your existing loan repayments every month to your in-hand every month. Most lenders need the FOIR to be around 30%, and anything over 60% is generally a red flag on the loan application. You can check your loan eligibility using a home loan eligibility calculator and work on reducing your monthly financial commitments in advance. This can help reduce your FOIR and also help you get better terms on your home loan application.
7. Keep your paperwork ready
If you want to have a quick and hassle-free loan application process, then simply apply for a home loan online and check for the list of required documents beforehand. Every loan applicant can keep standard documents handy, like identity proof, income statements, salary slips, bank statements, etc.
In conclusion:
From having a good credit score to calculating a repayment plan, a borrower can easily check the criteria using the home loan eligibility calculator to . If you do your financial planning, make a repayment plan beforehand and work on the abovementioned points, getting a home loan sanctioned will not be a hassle in the least.