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22 MARCH, 2022
Lenders closely scrutinize your eligibility when you apply for a home loan and consider many factors to ensure that you are eligible. Banks and financial institutions consider your eligibility while ascertaining your interest rates and loan amount. Therefore, you must check your eligibility when you apply. If you are not eligible, you should defer applying until you can meet the lender's eligibility. If you apply with low eligibility, lenders can reject your application or charge higher interest rates.
Here are a few tips to increase your home loan eligibility:
Your credit score is one crucial eligibility criterion. Before you opt for a home loan, check your credit score. Your credit score should be at least 750, as it is the score lenders prefer. A credit score is the indicator of your creditworthiness and credibility. The higher the credit score, the better are the chances of you getting lower interest rates. To get a home loan, you must increase your credit score.
Before applying, pay all your dues, be it loans or credit card bills. Too many debts can adversely affect your credit score. You can opt for a debt consolidation ratio. Keep your credit utilization ratio low, preferably below 30%, and mix different credit cards. Moreover, ensure to check your credit report for any errors. If there are any discrepancies, you must request its rectification timely.
A co-borrower can help enhance your eligibility. Therefore, opt for joint home loans. You can avail a home loan with your spouse or parents. Lenders club together the income of all the co-borrowers to ascertain the eligibility. It also divides the repayment burden and offers tax benefits. However, your co-borrower should have an income.
You can also opt for a longer tenure while applying. With longer tenure, you can keep your EMIs low, that will help you pay them timely without defaults. However, you must know that longer tenure can increase your total cost of borrowing significantly.
Lenders consider your debt to income ratio while processing your loan. The presence of high debts in your financial statements can adversely affect your eligibility. You must clear your debts and credit card dues before applying for a home loan. In addition, you must limit your Fixed Obligation to Income Ratio (FOIR) to up to 40% to enhance your eligibility.
Having additional income sources improves your financial health and enhances your eligibility. While filling out the application form, you must declare your additional income like rental income, part-time business, interest income, etc. Doing so will help you get a higher loan amount and lower interest rates while boosting your FOIR. Moreover, avoid changing jobs as it can affect your repayment capacity.
Ensuring that you have high eligibility will save you from rejections and help you get the best deals on a home loan. While considering the above factors to enhance the eligibility, you can also use a home loan eligibility calculator before applying. Apply for home loans, today.
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