How to Increase Your Eligibility for a Home Loan

Home loans today are of paramount importance today as without them it is nearly impossible to secure a home. Banks and nonbanking financial institutions have a list of criteria on which they base their decision to award an individual a loan. However there are a few things that you can do in order to increase your home loan eligibility. The following listicle ought to help you in the same.

Increase the tenure of the loan: Your EMI or equated monthly instalment often depends on the tenure of the loan (the duration over which the loan will be paid back). Increasing the tenure of the loan therefore may increase the amount of the loan. Let’s say that you were planning to take a loan for 10 years and your loan eligibility worked out to Rs. 20 lakhs, it might just be more prudent to double the loan tenure, as then the bank may see it fit to increase your eligibility to Rs. 30 lacs or more, given that you’re committing to pay back the amount over a longer duration of time.

Prepay any existing loan or complete one loan before applying for the home loan: In case you have a personal loan, with its term about to expire, with the bank that you’re planning to approach for your home loan, it would be a good idea to prepay the existing loan. Say for instance you have a personal loan of Rs. 100,000 that is set to expire over 8 months. Your monthly income is Rs. 50,000, of which you save Rs. 40,000 and use Rs. 15,000 of your savings to pay an EMI on the personal loan. It would be prudent to pay off the remaining interest on the loan at one go, or wait until the loan is paid off. Here’s how prepayment will improve your home loan eligibility. For starters your current savings are Rs. 40,000 but Rs. 25,000, after paying off a Rs. 15,000 EMI every month. So the bank will calculate your home loan eligibility based on the money in hand or in savings, i.e. Rs. 25,000 and this will mean that your loan amount eligibility will be severely hampered. Now upon prepayment your perceived savings to the bank will be Rs. 40,000 and that boosts your home loan amount eligibility positively.

Include spouse or family in the loan application: On paper this move will boost your chances of securing a home loan infinitely. As a family unit, to a bank you’re worth more than as an individual applicant and therefore your propensity and ability to pay back the loan and EMIs increases. Therefore both your loan eligibility and home loan amount eligibility are positively increased. Always ensure that your spouse or family member’s documentation is clear and present.

Mention any alternative sources of income in the loan application:  If you’re a salaried employee you may want to list any promotions you may be in line for or in case your spouse is an independent contractor or freelance professional, mention of his/her alternative sources of income will help assure the bank of your propensity to pay back a home loan.