Tips To Increase Your Home Loan Eligibility

A home loan is one of the best ways to raise funds while buying a new house. It helps if you are not being able to save up the entire amount. Applying for a home loan gives you the flexibility to buy a house of your choice by having a stipulated budget as per your capability of paying the interest for the same.
Almost all financial service providers offer home loans, and you can apply for one by following some simple steps:
 

Eligibility Criteria for the Loan

1. The age limit of the applicant needs to be between 21-65 years for salaried and 21-70 years for self-employed. Some financial institutions allow the lower age to be 18 years as well.
2. The work experience of a minimum of 2 years for salaried and 3 years for self-employed individuals.

Here are some ways to increase your home loan eligibility:
 

1. Adding a co-applicant

 A co-applicant applies for a home loan jointly along with the borrower to help in supplementing the income of the main applicant, thus, making him/her eligible for the loan. The co-applicant can either be a blood relative or a family member.
 

2. Repay your outstanding loans

 You must repay any outstanding loan to enhance your eligibility for the home loan.
 

3. Declare additional income sources, if any

 If you have any additional source of income such as rent, bonus, dividend, agriculture income, or more, other than the one mentioned in your application, you should inform the loan provider about it and provide documentary proof of the additional income such as ITR, bank statement, rent agreement etc., because this will ensure that one or the other source will be open for repayment of the loan without any fault. Additional income is also considered while calculating your eligibility. For example, bonus, incentives, commissions in the case of the salaried customer plays a vital role in his enhanced eligibility.
 

4. Opt for a higher tenure of the loan

 When you opt for a higher duration of the loan, then automatically you increase the chances of repayment as the amount of EMI is then reduced and will be easy for you to pay. So here you indirectly increase the eligibility for yourself.
 

5. Keep your credit score good

 The credit score measures an individual’s ability to pay back the loan that he/ she has taken. When you pay your debts on time you can achieve a higher credit score. If someone has taken too many loans, they may have low credit. A high credit score increases your chances of being eligible to get a home loan.

Also Read: Home Loan vs. Loan Against Property: What should you choose?
 

6. Keep your FOIR low

 Another tip to increase your home loan eligibility is to maintain a low FOIR. FOIR means Fixed Obligation to Income Ratio. FOIR is another term for the debt to income ratio. The lower your debt-to-income ratio or FOIR, the better your chances of getting a home loan. In most cases, a FOIR of less than 40 is regarded as favourable by the lender. When calculating your fixed obligation to income ratio, take into consideration your credit card payments and other loans’ EMIs. Below is the formula that will help you in calculating your debt-to-income ratio. 
 
FOIR= Monthly Debt Payment ÷ Gross Monthly Income
 

7. Higher down payment

 To improve your home loan eligibility, make an effort to put down a larger down payment. Financial institutions generally offer house loans with a maximum LTV of 75 to 80%. The higher the loan-to-value ratio, the greater the risk to the lender, resulting in a higher interest rate or stricter eligibility criteria for home loans. However, if you reduce the lender's risk by making a larger down payment, your home loan application will be processed quickly. 
 

8. Avoid job switch

 When conducting a credit appraisal for home loans, financial institutions check whether or not you are stable in your job or not. If you have a habit of changing your job frequently, the financial institution may reject your loan application. Therefore, while deciding to purchase a home, plan ahead of time. If you are a one who is constantly looking for a job change, then drop the idea of buying a home on loan for a few years.
 

9. Conduct research

You might be surprised if you came across this point in the article while searching for an answer to how to increase home loan eligibility. However, just like you have kept an eye on every residential real estate property in your city, don't forget to keep an eye on the various lenders. Every financial institution’s eligibility criteria for a home loan vary from one another. Review them thoroughly, and choose the one whose qualifying conditions match your profile. 
 
Also Read: Buying a House? Here are Tips to Reduce Your Home Loan Interest Rates

If you want to check whether you are eligible for a home loan or not, then you may use an online home loan calculator. Hero Housing Finance offers a home loan eligibility calculator to help you check the maximum amount you are eligible for. This is done after considering various factors such as age, income, other income (if any), financial status, repayment capacity, credit score and more.
 
Disclaimer: This post was first published on 24 November 2019 and has been updated for the latest information, freshness, and accuracy.