Paying off your old debt will improve your debt-to-income ratio and increase your home loan eligibility; you can get a higher loan amount and a lower interest rate too.
Home loans are generally high value loans. They are long term commitments and banks thoroughly scrutinize your credit report, income, and other existing liabilities to determine your repayment capacity.
A smart thing to do would be to pay off your old debts to improve your home loan eligibility. Existing loans pose a risk to your credibility; adding a home loan to your portfolio will only add burden to your monthly cash flow and that discourages lenders from sanctioning your loan. Even if they approve your loan, you may not get the desired loan amount, or the interest rate might be higher. This is due to the higher ‘risk ratio’ that is added to the base interest rate.
Check your home loan eligibility with our simple tool!
Personal loans and vehicle loans are some old debts that can be paid off with a little effort. Ensure that you don’t have any outstanding dues on your credit card. If you use your credit card regularly, make sure that you pay the full bill every month. This bodes well for your credit report when the lender checks it before approving your home loan.
What Are My Other Options To Improve My Home Loan Eligibility?
While you are trying to pay off your existing loans, you have to pay attention to the below points which can help you improve your home loan eligibility –
Adding a co-applicant on the home loan – Add an earning member of your family as a co-applicant on the loan. By declaring your combined income, you can increase your loan approval rate. You can add your spouse, parents, siblings or kids as co-applicants on your home loan. Higher the income, better the loan terms.
Improve your credit score – A credit score of 750 and more will get you the best home loan offers. You can improve your credit score by reducing your credit utilization ratio. Check you latest credit score to understand where you stand.
Creditmantri offers you a free credit score along with a detailed analysis of your credit health. Get yours today!
Go for a longer repayment tenure – While applying for your home loan, choose a longer repayment tenure. Longer repayment tenure means lower EMI amount. So it will be easy for you to manage your EMI payments and get the loan easily.
You can opt for higher down payment – Banks generally offer up to 80% of the property value as home loan amount. If possible, pay a higher down payment so that you apply for a lower loan amount. The eligibility for lower loan amount will be easier to meet and you can get the home loan easily.
Mention your additional sources of income – You can add your other sources of income on your home loan application to improve your eligibility. Additional income means a higher amount of disposable income. This means lower risk for the bank and your home loan approval chances are better.
Apply at a younger age – When you apply at a younger age, you have a longer earning potential and this reduces the risk for the lender. You can get a higher loan amount and better loan terms.
Other Factors That Affect Your Home Loan Eligibility
Getting all your documents in order before applying for a home loan
The lack of needed documentation is one of the most common grounds for home loan rejection. If you don’t have all of the required documents, your home loan application may be delayed or even denied. As a result, make sure to verify the lender’s website and have all of the necessary documentation on hand.
The documentation requirement is minimal;
For salaried staff, it includes ID proof, address proof, salary slips, and ITR statements.
Self-employed professionals must produce paperwork for both themselves and their companies. This comprises documents such as identification, proof of address, evidence of business ownership, GST statements, IT returns, revenue statements, and so on.
Choose your property from a reputed builder
Reputable builders are known for overcoming all legal issues and building homes to government-mandated criteria. Their construction quality is also excellent. These factors convince the lender that there will be no future issues with the property. You can also avoid any legal repercussions in the future.
In addition, most lenders have affiliations to the leading real estate developers. Choosing a lender-approved property developer increases your chances of getting your house loan approved swiftly and painlessly.
Go for a pre-approved home loan
One of the greatest strategies to get your home loan application accepted quickly is to be pre-approved. Pre-approved home loans are based on your ability to repay. The amount of your home loan is determined by the borrower’s current financial records. Pre-approved home loans are usually approved within one or two days after you submit the required papers and gives you a fair idea of your eligibility status.
Checking your home loan eligibility criteria is an important part of the house loan application process. Borrowers who match the lender’s eligibility criteria are approved for house loans, while those who do not meet the lender’s requirements may be turned down. But the good news is that you can boost your loan eligibility. A simple option would be to pay off your old debts first to raise your expendable income and subsequently improve your home loan eligibility.
Meta Description: Pay off your old debt, add a co-applicant to your home loan application, and show other sources of income to increase your home loan eligibility.
Read more New Construction Cleaning: How to Prepare Your Home for Move-In