Ways to Improve Your Mortgage Eligibility

Wednesday, 11 May 2022

Purchasing a dream home is usually a significant decision in one’s life. One must make numerous plans and adjustments to their budget and financials. Most of the time, your dream home budget will come out of your own wallet. It is the point at which you must choose between abandoning your goal and applying for a home loan to realize your desire.

It is advisable to examine your house loan eligibility before applying for a home loan so that you have a clear image of your eligibility. When you apply for a house loan, the lender will evaluate your ability to repay the loan in a timely manner based on the home loan eligibility criteria.

Home loan eligibility refers to the maximum loan amount you can acquire depending on factors including your present source of income, repayment capacity, age, credit score, and other factors.

We will lead you through crucial procedures in this post to assist you to enhance your home loan eligibility without difficulty.


  1. All existing loans must be paid off.


All of your existing ambiguous loans would have a negative impact on your home loan eligibility. Previous loan payments would have a significant impact on your home loan eligibility. Before approving your house loan, a lender will always analyze your outstanding debts.

Before applying for a house loan, make sure you have paid off and canceled all of your existing debts, obtained a no-due certificate, and had your CIBIL credit score updated.


  1. Extend the term of your home loan


Your home loan eligibility is decided by your capacity to repay the loan amount in monthly payments, also known as equated monthly installments (EMIs).

If you choose a longer loan term, you will have to pay lower monthly EMIs, which will suit all middle and lower-middle-class applicants’ repayment needs, and you will be eligible for a larger home loan amount to purchase your family’s dream home.

However, a longer loan term means you will have to pay the lender more money in interest.

Do not be discouraged; there is also a solution to this problem.

Given that your salary is expected to rise each year, the option is to increase the EMI amount each year as your income rises. You simply need to cut back on your spending to a certain extent in order to pay off your home loan faster.


  1. Maintain a FOIR of less than 40%.


The Fixed Obligation to Income Ratio (FOIR) is an important factor to consider when considering loan eligibility. It is the portion of your income that is now going toward loan repayment.

The higher the FOIR, the lower the odds of getting a loan. As a result, attempt to keep your FOIR below 40% to maximize your chances of getting a loan approved.

You can reduce your FOIR by either increasing your source of income or paying off all of your debts.

Lower FOIR indicates fewer liabilities, which increases your disposal revenue and thus your repayment capacity.


  1. Build a strong credit history


Any financial institution or bank that offers home loans looks at your credit report to assess your repayment history and categorize you as a high-risk or low-risk potential borrower.

When a lender approves your house loan, one of the important considerations is your CIBIL score. Your CIBIL score is an indicator of your capacity to repay a loan within the specified time frame. Maintain a credit score of at least 750 (out of 900) to boost your home loan eligibility and assist you to get a lower interest rate from the loan provider.


  1. Choose a shared home loan to increase your eligibility.


Low income, a poor credit score,, and other issues are common reasons for lenders to refuse house loan applications. Instead of filing as an individual applicant, you can boost your home loan eligibility by choosing a shared house loan.

A joint house financing necessitates the consideration of a co-applicant who is a member of your immediate family.


  1. Additional Source of Income

If you do not meet the house loan eligibility requirements, you can look into other sources of income, such as rental income, interest from fixed deposits, any bonuses you have gotten from your company, or extra income obtained through freelancing. All of these sources of income will help you meet the home loan eligibility requirements for your dream home.


Ensure that you have revealed all of the correct information in your application during the loan approval procedure. Otherwise, your home loan application may be turned down.



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