Today, many lenders in India offer home loans at a competitive interest rate. But, to get your loan approved you need to showcase the lender that you have a strong financial standing. Read on to know more about how to strengthen your home loan application.
Applying for a home loan is the most convenient way to get funds for home purchase. It is also a wise financial decision, as you can repay the amount in smaller EMIs over 15-30 years. But, to get your loan sanctioned, you must show the lender that you have a strong financial profile and have the capacity to repay the amount within the specified duration.
Remember, when you avail a home loan, you must submit an applicant form with details regarding your finances, and other important things. You must also submit a few documents to underpin the claims in your application form. Based on the details mentioned in the application, the lender approves or disapproves the loan.
So, if you are a first-time home loan applicant, here are a few vital tips to strengthen your home loan application.
Pay off your existing dues
If you are already nursing any loans, then this may affect your home loan eligibility for home loan. So, if you have any outstanding dues, it is advisable that you focus on paying off the same before applying for a home loan.
This is important because, while approving the loan based on your debt-to-income ratio. It is a ratio that indicates the percentage of total monthly income that goes to paying off the debts. If the ratio is high, there is a risk that the lender will reject your home loan application.
Improve your CIBIL score
One of the easiest and most effective ways to strengthen your home loan application is to maintain a high credit or CIBIL score. The credit score reflects your credit worthiness, and if your score is high, it will showcase to the lender that you have the financial means to repay the borrowed amount within the specified duration.
Here are a few vital tips to improve your credit score –
- Always pay your EMIs on time.
- If you have any outstanding credit card dues pay off the full amount before applying for a home loan.
- Keep the credit utilisation ratio to a maximum of 20-30% of the credit card’s spending limit.
- Avoid defaults on loan settlement.
- Don’t apply for too many loans or credit cards at the same time. This will showcase that you are credit hungry and it will affect your credit score.
- Check for any errors in the credit report and report the same immediately to the credit bureau.
Apply for a joint loan
Another effective way to strengthen your home loan application and get your credit sanctioned is to apply for a joint home loan. When you apply for a joint loan with your spouse, or any other family member, the financial institution will consider both your income to assess the repayment capacity.
Also, if the co-applicant has a high credit score, it will work in your favour and you have better chances of getting the loan approved without any hassles. Also, when you apply for a joint loan, you can split the repayment burden and both of you can enjoy tax benefits.
Apply for a loan with longer tenure
Choosing a longer repayment period is a great way to increase your home loan eligibility and get the credit sanctioned. When you apply for a loan with longer tenure, the EMI will reduce and the repayment will be easier. However, on the flip side, longer tenure means you will be paying higher interest in the long-term.
Use the above-mentioned tips to your advantage and get your home loan approved from any lender of your choice.