Denice R. Preston
Home loans have become easier to obtain your dream home due to the reductions in interest rates and fees over the past three years. A reputable financial institution can help you apply for a loan to buy a house. A little research will help you determine if you are eligible for a loan.
You can overcome some of the obstacles to home loan processing by reading about the application process. It is easy to meet the lending party’s eligibility criteria. A reputable bank or non-banking finance organization will examine your credit score, loan term, income, and repayment ability. Before they approve your application for a home loan,
- Increase Your Credit Score
The loan provider will review your credit score and credit history to determine your creditworthiness when you apply for a mortgage. A high credit score is a good news for any financial lender as it lowers the risk factor. You must ensure that your credit card and loans are paid on time to reach this mark. Your credit score can be severely affected by any delay or default. A credit score of 725 or higher is considered excellent by most lending institutions for loan approvals. A good credit score can also result in lower interest rates on home loans.
- Get a Long-Term Loan Tenure
Repayment of a home loan is a commitment that will last a lifetime. You can improve your eligibility by applying for a home loan with a longer-term. You should note that a longer-term home loan will lower your EMI and increase the total interest amount that must be paid. You can reduce the cost of applying for a loan by choosing a longer repayment period and a lower interest rate.
- Keep your FOIR below 30%
Fixed Obligation to Income Ratio, also known as the FOIR (Fixed Obligation to Income Ratio), is the ratio between your debts and income. This ratio is also known as the debt-to-income ratio. Your FOIR must be less than 30% of your income. This is the minimum requirement for most lending institutions. To increase your chances of getting a loan for your home, you should limit your FOIR to 30%.
- Apply for Joint Loans
Applying for a loan with a family member earning money is one of the best ways to increase your chances of getting a loan. Your spouse can be added as a co-applicant. This will increase your eligibility and give you additional benefits such as lower interest rates and easy repayment methods. Co-borrowing can also help you to reduce your EMI and get tax benefits.
- Additional Income Source
An additional source of income can increase your eligibility for a home loan. You can have a rental income source or a side business. This will increase your creditworthiness and ability to repay the loan. Renting out a home or apartment you already own will help you prove your eligibility.
- Don’t Change Your Job Very Often
Avoid job changes if you are a salaried person and plan to apply for a home loan. If you work for two consecutive years in the same company, your eligibility for a home loan may be affected. Smart planning is essential before you present your loan application to the lender.
