Best tips to increase your Home Loan Eligibility

Securing a home loan is a significant step in the journey to owning your dream home. However, the process can be daunting, particularly when it comes to understanding what is the eligibility for home loans set by lenders. The good news is that there are several strategies you can employ to enhance your home loan eligibility criteria.

If you are fixated on how to get a home loan easily, then this article is for you. It delves into the most effective tips that can help you qualify for a larger loan amount with favourable loan terms.

How to Increase Home Loan Eligibility?

A strong housing loan criteria profile is essential for securing a loan with favourable home loan interest rates and terms. A home loan criteria usually include age, financial stability, credit score, loan term and documents. You can significantly improve your chances of getting approved for your home loan by implementing these key strategies:

• Maintain a Good Credit Score

  Your credit score is one of the most critical factors lenders consider when assessing your loan application. A high credit score reflects your ability to manage credit responsibly, making you a lower-risk borrower. To maintain a good credit score, ensure that you pay your bills and EMIs on time.

  Avoid maxing out your credit cards, and try to keep your credit utilisation ratio below 30%. Regularly check your credit report for errors and rectify any discrepancies immediately. A score above 750 is generally considered excellent and can significantly boost your home loan salary eligibility.

• Increase the Loan Tenure

  Opting for a longer loan tenure can increase your eligibility by reducing the EMI (Equated Monthly Instalment) burden. A lower EMI makes it easier for you to manage monthly payments, which can make you attractive to lenders.

  

  While considering home loan eligibility criteria, you must know that a longer tenure would mean paying more home loan interest rates over time. It's essential to strike a balance between the tenure and the total interest outflow to ensure that you don't end up paying more than required.

• Add a Co-Borrower

  Adding a co-borrower, such as your spouse or a close family member, can enhance your loan eligibility. When you apply with a co-borrower, the lender considers the combined income of both applicants, which can allow you to qualify for a higher home loan amount eligibility.

  Additionally, if your co-borrower has a strong credit history, it can further strengthen your application. You must note that both applicants share the responsibility for repaying the loan, so ensure that your co-borrower is equally committed to the financial obligation.

• Increase the Down Payment

  Lenders are more likely to approve a home loan application if you can contribute a higher down payment. A larger down payment reduces the loan amount you need to borrow, which in turn lowers the lender's risk.

  By increasing your down payment, you not only improve your eligibility but also potentially secure better interest rates. Aim to save at least 20% of the property's value as a down payment to boost your chances of approval and reduce the overall cost of the loan.

• Reduce Existing Debt

  High levels of existing debt can negatively impact your mortgage loan criteria. Lenders assess your debt-to-income ratio to determine whether you can manage additional debt responsibly. To increase home loan eligibility, focus on paying off any outstanding loans or credit card balances before applying for a home loan.

  

  This will not only improve your debt-to-income ratio but also free up your income for the home loan EMI (equated monthly instalment). Reducing existing debt demonstrates financial prudence and reassures lenders of your ability to handle new credit.

• Keep Your FOIR Below 40%

  The fixed obligation to income ratio (FOIR) is a key metric used by lenders to assess your repayment capacity. It measures the percentage of your income that goes toward fixed obligations, such as existing EMIs and other monthly commitments. To improve your home loan eligibility, aim to keep your FOIR below 40%.

  This indicates that a significant portion of your income is available to service the new home loan, reducing the risk for the lender. If your FOIR is higher than 40%, consider repaying some of your existing obligations or increasing your income to bring it down.

Final Thoughts

Enhancing your home loan eligibility criteria requires careful planning and a proactive approach to managing your finances. By following these guidelines, you can significantly improve your chances of securing a home loan that meets your needs. As you start this journey, consider partnering with a trusted lender like IIFL Home Loans, which offers competitive rates and personalised services to help you realise your homeownership dreams.