Owning your first home is now an easy reality, thanks to home loans. However, buying a house isn’t as simple as adding an item to the cart or swiping your card at the shopping counter. The process requires several thoughtful financial decisions.
So, here are a few loan approval tips you should keep in mind as a first time home buyer.
Check your credit score
Your credit or CIBIL score is an essential factor in determining your home loan eligibility. The loan amount you are eligible for and the chances of getting your loan approved depend on your CIBIL score. That’s why it’s recommended to check your CIBIL score and credit history before applying for a loan.
If you have a credit score of above 750, you’ll be an excellent candidate for borrowing home finance. If not, you can improve your credit rating by repaying your debts like paying your credit card bills and EMIs on time. Besides, you can secure more attractive home loan interest rates with a good CIBIL score and a default-free credit history.
Consider a joint home loan
When you co-borrow money from the lender with your spouse, parent, or sibling, approval chances for your loan application will increase. How? That’s because the lender considers the income of both the applicants pooled together. This way, your loan eligibility improves, and you can get a bigger loan amount.
To boost your chances of getting the loan approved, you can also show an additional source of income to your lender. This means, if you have a part-time business, freelancing salary, or rental income, you must let your lender know. This indicates a higher repayment capacity.
Make a larger downpayment
A housing loan covers the 75-80% value of your property. You are expected to pay a minimum downpayment of 15-20%, and the lender covers the rest. However, since this is no maximum limit to making a downpayment, you can pay a higher amount upfront to lower your loan amount. This, in turn, reduces the size of your monthly instalments.
Before making a downpayment, you can use a home loan EMI calculator to settle on a suitable potential EMI and interest amount.
Pay off existing debts
Are you still servicing your education loan or have credit card bills pending? If yes, before approaching your preferred lender, get rid of all existing debts. Why? That’s because if your financial obligations and debts eat up a large chunk of our income, it might indicate your inability to pay off new EMIs. This way, your loan application might be declined. Clear your existing debt burden to increase your loan approval chances.
To sum up
Buying your first house might seem daunting. But, with proper financial planning, you can easily take a housing loan and finance your dream abode. Don’t forget to use an EMI calculator for home loan to figure out how much you need to pay monthly to comfortably repay the loan. Happy borrowing!