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How to Improve Your Home Loan Eligibility?

In the bustling metropolis of India, where aspirations reached for the stars, lived Rhea, an ambitious young architect with a burning desire to build her own nest. She had set her eyes on a picturesque apartment in the heart of the country, but there was one significant hurdle in her path: securing a home loan.

Understanding the importance of availing a home loan

Tax benefits

Home loans offer tax deductions on both the principal amount and interest paid, reducing the overall tax liability. This financial benefit is a significant advantage for individuals looking to save on taxes.

Realising dreams

A home loan acts as a bridge, transforming your dreams of owning a home into a reality, providing a sense of security and stability for you and your family.

Asset creation

Buying a property through a home loan builds an appreciating asset that can be a valuable investment in the long run. It offers the potential for capital appreciation, making it a lucrative proposition.

Affordable repayment

Banks and financial institutions provide flexible Equated Monthly Installment (EMI) options, making it easier for borrowers to repay the loan over a reasonable period. This eases the financial burden and ensures smooth repayments.

Leverage on the current value

As property values appreciate over time, your equity in the property increases, giving you the advantage of future financial leverage. It opens possibilities for availing further loans if needed.

Freedom to choose

By opting for a home loan deal, you get the freedom of choosing the prudent home that aligns with your preferences and lifestyle. It allows you to make a well-informed choice without any compromises.

Enhancing credit profile

Timely home loan repayments can boost your credit score, leading to better loan offers in the future. A good credit score reflects responsible financial behaviour and makes you an attractive borrower.

Building financial discipline

Regularly paying EMIs instils financial discipline and money management skills. It encourages you to plan your finances and prioritise your expenses.

Quick home ownership

Home loans speed up homeownership, helping you to move into your new home sooner rather than waiting for years to save the entire purchase amount.

Tackling inflation

Investing in a home through a home loan safeguards you against the impact of inflation, as property prices generally rise over time. It acts as a hedge against inflation, preserving the value of your investment.

Potential rental income

In case you move out of the property, it can be rented out to generate additional income. This extra income can help in meeting other financial goals.

Family security

Owning a home brings a sense of pride and security to your family, creating a stable environment for children to grow and flourish.

Retirement planning

A self-owned home ensures a comfortable retirement, free from the worries of paying rent. It provides a sense of financial security during your golden years.

Emotional fulfilment

The feeling of having a place to call your own brings unparalleled emotional fulfilment and joy. It creates a strong sense of belonging and attachment to your property.

Social standing

Being an owner of a home enhances your social standing and endows a sense of acceptance in a community. Moreover, it even fosters permanence and stability.

Ways to improve your home loan eligibility

Clear existing debts

Reducing outstanding loans and credit card debts lowers your debt-to-income ratio, enhancing your eligibility. Lenders prefer borrowers with a lower debt burden, as it indicates better repayment capacity.

Maintain a healthy credit score

Having a good credit score of over 750 is a crucial parameter in deciding your home loan eligibility. Lenders evaluate your credibility by fetching your credit report. So, ensure to repay your dues in full and on time, avoid defaulting any of your loan dues, and maintain a good credit record. Following such credit-healthy practices will allow you to have a good credit score.

Include co-applicants

Adding a spouse or family member with a stable income as a co-applicant boosts eligibility. The combined income of co-applicants increases the total loan amount you can qualify for.

Increase your down payment

A higher down payment demonstrates financial discipline and reduces the loan amount, making you more eligible for a home loan. It also signals to the lender that you are committed to the purchase.

Choose a suitable tenure

Opt for a longer tenure to reduce the EMI burden and enhance eligibility. A longer repayment period reduces the EMI amount, making it easier for you to meet the lender’s eligibility criteria.

Show additional income

If you have rental income or freelance earnings, provide documented proof to increase eligibility. Demonstrating additional sources of income strengthens your case as a borrower.

Regular income source

Lenders usually prefer providing loans to those seekers having a steady income source and stable job history. In case you are salaried, ensure to have a consistent record of employment. In the case, you are self-employed in nature, make sure your business earns a stable income.

Property selection

Choose a property from a reputed builder or in a well-developed area, as it improves the chances of approval. Lenders have a higher confidence level when the property has good market value and is located in a prime location.

Minimise unsecured loans

Avoid taking new unsecured loans before applying for a home loan, as they reduce your eligibility. Lenders consider your existing liabilities when assessing your repayment capacity.

Loan against assets

Utilise existing assets like fixed deposits or insurance policies as collateral to enhance eligibility. Offering additional security to the lender improves your chances of loan approval.

Employment stability

Lenders prefer applicants with a stable job history, so avoid switching jobs frequently before applying for a home loan. Consistent employment indicates a reliable income source.

Accurate documentation

Ensure all documents are accurate and up to date to expedite the loan approval process. Any discrepancies or incomplete documentation may lead to delays or rejection.

Government schemes

Check for various government schemes that offer subsidised home loan rates or down payment assistance. Utilising such schemes can enhance your affordability and eligibility.

Choose the right lender

Different lenders have varying eligibility criteria, so research and select the one that suits you best. Consider factors like interest rates, processing fees, and customer service. For example, you can explore home loan options from reputed lenders like Bandhan Bank Home Loan or IDBI Home Loan.

Pre-approval

Get pre-approved for a home loan to know your eligibility in advance and negotiate better terms with lenders. Pre-approval gives you a clear understanding of how much loan you can get, helping you make informed decisions.

With determination and perseverance, Rhea diligently followed these steps and improved her home loan eligibility. Finally, her dream of owning a cosy apartment became a reality, all thanks to her strategic approach and the support of the right home loan provider. As she moved into her dream home, she knew the journey from start to end was all because of the correct financial preparation, selection of the correct lender and correct steps towards a happier financial future.

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