Whether salaried or self-employed, most people have to resort to a home loan for funding the big purchase. Unless you have planned your finances so well that you have sufficient savings to fund the purchase or invest in a project designed for the low-income group, the only way of funding the investment will be a Home Loan. Apart from scouting for a lender offering the loan at the best rate, you will also have to check your Eligibility before Applying for Home Loan. What if your eligibility does not support your project and the funding is insufficient? To solve this issue, you will have to find ways to improve your eligibility.
The general eligibility criteria for home loans
The following are the eligibility criteria to get home loans:
- The age of the applicant at the time of applying for the loan should be 18 to 23 years.
- The age of the applicant age at the time of loan maturity must be between 60 to 65 years, depending on the employment. Some banks permit the exit age up to 70 years.
- Salaried/Self-employed individuals and professionals can apply for the loan.
- The credit score should be 700 and above.
- A minimum work experience of 2 to 3 years and business existence of 3 to 5 years is mandatory.
- A minimum monthly income of Rs. 15000/- to Rs. 20000/- depending on the city of residence.
- Residents and non-residents can apply for the loan.
Factors that affect the Home Loan Eligibility
Various factors affect home loan eligibility. Deliberating on the aspects and improving them if necessary will enhance your home loan eligibility
- Source of Income
- Repayment history
- Credit Score
- Alternate source of income
- Credit Utilisation Ratio
- Number of dependants
Here are a few tips and tricks to improve your eligibility that may help you.
#1. Choose a longer tenure
The best way to improve your eligibility is to choose a longer repayment term. The financial institutions provide flexible repayment options ranging from 10 years to 30 years. The most opted tenure is 15 years. But if you are young and have 25 to 30 years of service before retirement, you can choose for a more extended period. A longer period will bring down the EMI, which will increase your loan eligibility sumptuously.
#2. Repay your existing debts and credit card dues
Suppose there are several short term loans like personal loans, vehicle loans, or credit card EMIs. You try to repay them to increase the disposal amount available for funding the proposed EMI. You can repay these loans from the fund reserved for the down payment. This will spike up the available disposable income to provide for the proposed EMI. With the reduced down payment, you will have to apply for a higher home loan. You will benefit immensely from this option since the loans with a higher interest rate have been paid out from a loan with a lower rate of interest. In addition, you have acquired a long term to pay off those loans. By doing so, you can increase the SBI Home Loan Eligibility by over 75%
#3. Borrow in joint names
If the loan amount approved with your income is not adequate to fund your project, you can avail of the home loan in joint names. The joint borrower or the co-borrower could be your parent or spouse with a regular income. The co-borrower will be equally responsible for the repayment of the loan instalment. It is recommended to add the spouse as the co-borrower as both can avail of tax benefits. Some of the financial institutions permit more than one co-borrower. If you are looking at LIC Home Loan, the LIC Home Loan Eligibility can be enhanced by over 80% with the induction of a co-borrower.
#4. Build a relationship with the bank
If you have decided upon the bank from which you want the home loan, it is best to open an account with it before deciding to apply for the loan. Carry out transactions in the account for a minimum period of one year. During that period, you will have to build a relationship with the banker and pump in a sufficient amount into the account. This will help convince the bank that you have an alternate source for the repayment of the loan. This relationship-building ordeal will not only enhance your eligibility but also will be able to get a better interest rate.
#5.Improve your credit score
A good credit score is one of the vital elements to assess your eligibility. ICICI Bank Home Loan Eligibility norms stipulate a credit score above 700 to qualify for the loan. A good credit score speaks of your financial discipline and integrity. It indicates that you handle your financial commitments with responsibility by paying the EMIs and credit card dues on time and within the stipulated period. The chances of approval of a home loan get brighter with a good credit score.
You check your credit score for any discrepancies before you apply for the loan. If the discrepancies are not due to your negligence, you will have to speak to the customer support division of the credit information bureau and get the issue resolved. If the declined score is due to overdue in any of your loan account, then clear all the unpaid and get the score corrected before you approach the bank.
#6. Credit Utilisation Ratio
It is the ratio of the extent of credit utilisation to the credit limit sanctioned by the lender. For instance, the ratio to the credit limit set on your credit card and the extent to which you utilise your card. If you are in the habit of using the credit limit to the full, the lender will infer that you depend on the credit for your expenses. This brings down your creditworthiness. Avoid using the credit card up to the total limit if you have to enhance your eligibility for a home loan.
You can shop around to find a deal with simple eligibility norms. You can always go to marketing persons of the lenders who are constantly pitching for business. They will help you to negotiate a better deal with the lenders.