According to a recent report published by CRISIL, the secured credit facility sector that principally includes home loans is expected to double by the next four years, i.e. the financial year 2023 – 24. The report pegs this sector to grow to Rs.46.1 trillion by the financial year 2023 – 24.
This report attests such growth to factors like –
- An increasingly competitive market would engender product innovation and lesser costs for borrowers.
- Digital access to home loans to the lion’s share of the population.
Nevertheless, even with growing convenience and ease of availability, borrowers still need to satisfy the home loan eligibility criteria put in place by lenders. Ergo, individuals ought to first note the factors based on which financial institutions determine an applicant’s eligibility.
These are –
- Credit score.
- Credit history.
- Income.
- Age.
- Debt-to-income ratio.
- Loan tenor.
- Down payment.
What are the ways to improve eligibility for a housing loan?
Here are the ways how an individual can improve their home loan eligibility –
Opt for a higher down payment
The down payment is the amount that applicants pay out of their pocket when purchasing a residence using a home loan. The lender pays the remaining market value of such residence.
Individuals can improve their eligibility for a home loan by voluntarily opting for a higher down payment. It lowers the perceived risk of lending for a financial institution and increases the chances of loan approval.
Apply for a joint loan
Individuals can also consider applying for a joint loan with their working spouse. Co-borrowing would lower the perceived risk of sanctioning a large-ticket loan due to increased monetary feasibility. It is one of the reasons why individuals should consider owning a property with their spouse.
Enhance credit score
Most reputed financial institutions require applicants to maintain 750 or above as the CIBIL score for a home loan. Even though home loans are secured credit facilities, lenders prefer a high score to minimise their risk. Therefore, individuals should consider checking their credit report to detect areas through which they could improve their credit score.
Mention additional income source
In case an applicant holds an additional source of income, they must disclose the same to their lender to improve home loan eligibility. Consequently, such income proof is crucial among the documents required for a home loan as it substantiates their claim for additional income.
Maintain a low FOIR
Fixed Obligations to Income Ratio is a key determinant of an applicant’s home loan eligibility. It represents an individual’s affordability and repayment capability going forward.
According to financial experts, individuals must maintain a FOIR within the range of 40% – 50% to improve their eligibility for a home loan. A low percentage assures a lender of an applicant’s financial capability to take on another fixed obligation without risk of default.
Opt for a longer tenor
A longer tenor brings down the EMI that, in turn, enhances likeliness of timely repayment. Therefore, individuals must select a tenor that sits right with their income without straining their financial standing to improve their home loan eligibility.
Additionally, individuals can also use a home loan eligibility calculator to check whether they qualify for a housing loan. In the event they cannot avail the desired amount, they can adopt the aforesaid measures to improve the same.