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17 MAY, 2021
Agreed, availing a home loan is not a child’s play. And, there are various aspects that you should be aware of before opting for it. What should be the loan tenure? How much is the interest rate? The questions occurring in your mind could be endless. However, with the right guidance and adequate knowledge, availing a home loan can be simple and easy.
The best way to get an easy home loan is to improve home loan eligibility. Typically, your loan application is approved faster if you have high eligibility. Here are five home loan tips to improve your eligibility.
Improve your credit score
A credit score enables the lender to determine your home loan eligibility. Lenders usually prefer a credit score of 700 or above. You should try maintaining a good credit score if you ever plan to avail a home loan. While the credit score will not increase immediately, you can take steps to improve it. You must pay EMIs and credit card dues on time. Also, keep a low credit utilisation rate to improve eligibility. Moreover, review your credit report periodically to check and rectify errors, if any.
Take a joint loan
Taking a joint loan with your spouse is one of the easiest ways to enhance loan eligibility. The income and credit score of the co-applicant is also considered to determine the overall loan eligibility, thus increasing the chances of approval.
Clear existing debt
Usually, the lender considers a borrower’s Fixed Obligation to Income Ratio (FOIR) as one of the means to assess your eligibility. This ratio is the comparison between your current obligation to the total income. If you have a high FOIR, it could reduce your eligibility as it means you are already paying a considerable amount of earnings towards debt repayment.
Opt for a longer tenure
Usually, it gets easier to repay the loan when you take a longer tenure as the EMIs become relatively smaller. It also reduces the risk for the lender and thus can improve your eligibility. However, a longer tenure can increase your interest outgo. For instance, a Rs 50 lakh loan for a tenure of 10 years would have an EMI of Rs 66,075, with a total interest outgo of Rs 29.3 lakh. However, the same loan for a tenure of 20 years will have an EMI of Rs 48,251, but a total interest outgo of Rs 65.8 lakh.
Documents Required & Lender’s Eligibility Criteria
Ensure to keep the required documents handy while applying for the home loan. In order to speed up the loan process, the essential documents that you’ll need include income proof, address proof, identity proof, passport size photograph, etc. Be careful while filling the application form, as any errors may lead to loan application rejection.
Pay Higher Down Payment
Try to pay at least 20% of the property cost as down payment. It makes it easier to pay off the loan faster. Higher down payment enables you to minimize borrowing. It may also help you get a lower interest rate.
Calculate Home Loan EMI
Use a home loan EMI calculator to check your monthly instalment amount. You need to input loan amount, tenure and interest rate. This helps to estimate the loan amount that you can avail, check your home loan eligibility and make the home buying journey smooth.
It is crucial to disclose all the details in the application in order to avoid loan rejection. Respond to your lender promptly for any additional information so that there is no delay in closing the loan process. Apply for a home loan with Kotak Mahindra Bank today!
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