Buying a house can turn out to be one of the most exciting and stressful things at the same time. Nowadays, with rising costs, it has become necessary to take a home loan to buy your dream house.
The borrower’s loan application gets approved only after the lender considers all financial documents. Thus, before proceeding with any loan application, borrowers should check home loan eligibility and keep the necessary documents ready. A proper understanding of the ways of enhancing home loan eligibility can help borrowers get faster home loan approval.
Effective tips to get home loan approval quickly
Before applying for a loan, the borrower must make sure that there are no bad debts and that the loan amount would be repaid on time. A simple mistake can lead to rejection of the home loan application. This will, in turn, affect the borrower’s credit score.
To avoid any errors, borrowers should be aware of the entire home loan verification process, especially if they are first-time home buyers.
Rejection of home loan approval discourages borrowers and hurts their credibility. Thus, borrowers should find out ways to increase their loan approval chances. Mentioned below are a few tips which will help borrowers to get quick home loan approval:
- Check credit score before applying for a home loan
Before approving any home loan, lenders look for a good credit score and credit history. Borrowers with a credit score higher than 750 are generally eligible for getting home loans. Better the credit score, the faster will be the approval of the loan application.
Any kind of missed or late payments in the credit history affects the credit score. It is not possible to build up one’s credit score overnight; it takes about 6 to 24 months. Thus, if an individual has plans to purchase a home in the next year, he/she should start working on improving his credit score as soon as possible. Here are some tips:
Tip 1: Never miss out on any payment of credit card bills or loan EMIs.
Tip 2: Check the current credit score and report to get an idea of the areas that need improvement.
Tip 3: Keep the credit utilisation score below 30%.
Tip 4: If there is any ongoing loan, pay it off to lower the debt-to-income ratio and increase eligibility.
- Make sure the credit report is error-free
Along with maintaining a good credit score, check the credit report as well to make sure it is error-free and there are no discrepancies. Many loan companies misreport information which is very common. So, cross-check the credit report generated by the credit bureaus and request for rectification if there is any error.
Lenders look into this credit report along with checking the credit score before they sanction any loan. Thus, borrowers should keep their credit report error-free to get their loans approved instantly.
- Go for a larger down payment
NBFCs and banks pay about 80%-90% of the value of the property after approving home loans. The borrowers need to take responsibility for the rest of the amount. It is possible to make a larger down payment and borrow a low loan amount. By using a home loan calculator, borrowers can estimate their monthly EMI based on the loan amount.
Making large down payments will help to decrease the interest payable on the loan amount. The loan approval process will also be fast and hassle-free.
- Apply for a home loan jointly
When applying for a home loan, try to apply jointly with another earning member of the family. This helps in speeding up the loan approval process. Lenders prefer joint loan applications as that brings in two incomes and higher credit scores, which means that there are high chances of faster loan repayments.
Another advantage is that applying for a home loan jointly helps co-borrowers to apply for a bigger loan amount. This is because both borrowers will then have higher repayment capacity than a single borrower. Moreover, if a female co-borrower is included in the application, lenders offer discounted home loan interest rates and one can avail better tax benefits.
- Opt for a home loan with long tenure
Applying for a home loan with a long tenure reduces the borrower’s monthly EMIs thereby, reducing their monthly repayment obligation as well. Lenders also prefer this method as this lowers the chances of default also.
- Keep all documentation handy
Home loans get rejected if the borrower fails to keep all their documents ready in hand. Thus, borrowers should check the lender’s website and make sure to keep all their documents ready and prepared.
Here are the basic documents needed for most home loans application:
- For salaried employees: The list of documents to be provided for a home loan includes an ID proof (PAN, Aadhaar, etc), income proof, address proof, and IT statement for the last few years
- For self-employed people: They are needed to provide all documents of themselves as well as for their business. This includes ID proof, address proof, GST statements, IT returns, revenue statements, proof of business ownership, etc.
Factors affecting home loan eligibility criteria
To determine the eligibility of a home loan for an applicant, banks check the profile of the applicant. Some of the aspects that are taken into consideration include income, type of employment, credit score, etc., which have been discussed below:
- Income: This is one of the most important factors for determining the eligibility of a home loan. If the income of a borrower is high, the eligibility for a home loan also becomes higher because the repayment capacity is assumed to be higher. Banks approve the maximum loan amount considering high income.
- Age: This factor also affects the eligibility for a home loan. After considering the borrower’s age, lenders decide the loan tenure. Younger age indicates longer repayment tenure and appreciation in income over the years.
- Debt obligation: A higher debt obligation reduces the eligibility for a home loan. This is because lenders assume that the borrower will fail to pay the EMIs of multiple loans on time.
Many banks and financial institutions provide pre-approved offers to their existing customers. These are applicable mostly on home loans or loans against property. Eligible customers can check the eligibility for these loans by simply visiting the website of the lender and entering their name and contact details. This will help to carry out their loan application process faster.
During the home loan application process, borrowers must disclose all necessary financial information. Be sure to submit all the documents to avoid rejection. Borrowers can follow the tips mentioned above to avail a home loan seamlessly.