19 APRIL, 2022

You might know that availing a home loan can ease the burden of purchasing a house. But applying for a home loan while completing all the formalities and procedures can be a daunting, unnerving task. While a home loan provides various advantages, you must get a home loan that has favourable terms. For example, it would be convenient to get low-interest rates and flexible tenures. Moreover, your home loan should fit your budget and not affect your finances. The best way to get favourable terms on the home loan is to increase your eligibility. When you avail a home loan with high eligibility, there are more chances of you getting lower interest rates, high loan amounts, etc.

Here are some ways to enhance your eligibility and get a home loan on favourable terms.

 

  • Improve your credit score

Your credit score is a crucial parameter that lenders review while processing your application. If you have a low credit score, it indicates poor repayment capacity and higher risk for the lender. Therefore, to improve your eligibility, you must have a high credit score, preferably above 750. Having a higher credit score improves your creditworthiness and credibility and helps you get better loan terms. Before applying, you must take steps to improve your credit score. Pay off all debts, maintain a healthy credit mix of secured and unsecured debts and keep your credit utilisation ratio below 30%. Moreover, check the report periodically to ensure there are no discrepancies in your credit report.

 

  • Declare your additional income

Lenders scrutinise your monthly income to ensure that you have enough income to pay off the loan. If you have a low income, they can reject the loan or offer high-interest rates to cover the risk. Therefore, to enhance home loan eligibility, you must declare all the income sources. It could be any rental income, returns from investments or income from any part-time job.

 

  • Clear off your debts

Existing debts can affect your loan repayment capacity, eligibility and loan terms. Therefore, it would be best to clear off your existing debts when you apply for home loans. You can opt for debt consolidation. It is also advised to clear off your credit card dues and maintain a low debt-to-income ratio.

 

  • Opt for a joint home loan

If your eligibility is low and you fear not getting convenient loan terms, you can opt for a joint home loan. Having a joint home loan helps enhance your eligibility, increasing your income and credit score. Moreover, it also helps divide the burden of loan repayment, thus reducing the chances of defaults. You could also avail a joint home loan with your earning spouse or parents.

 

While improving your eligibility can help get the best home loan terms, it is crucial to be aware of different loan aspects. You must read the fine print carefully to ensure that all the terms and conditions are suitable before taking the plunge.

 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.