Back-back repo rate hikes in the past year have made it increasingly challenging to realize your dream of owning a home. Rising interest rates have increased the cost of home loans and decreased the maximum loan eligibility for borrowers. The steep surge in interest rates in recent months has drastically reduced the quantum of home loans that borrowers can avail against their salaries. However, there are strategies you can employ to enhance your eligibility and secure a larger home loan.
Here are five effective strategies recommended by financial experts:
Reduce Existing Debt
Lowering your Fixed Obligations to Income Ratio (FOIR) can significantly improve your borrowing capacity. By paying off outstanding debts, such as credit cards or personal loans, before applying for a home loan, you demonstrate a lower-risk profile and showcase your ability to handle a larger loan. Adhil Shetty, CEO of BankBazaar.com, advises, "Lowering your existing debt is crucial in improving your eligibility for a higher home loan amount."
Consider A Joint Application
If your spouse or parent has a stable income, considering a joint application can increase the loan amount you qualify for. Combining your incomes with a co-applicant can boost your eligibility, provided both applicants have a strong credit history. This approach demonstrates shared financial responsibility and can positively impact your loan approval. According to Atul Monga, CEO and co-founder of Basic Home Loan, "Adding a co-applicant or guarantor with a strong credit history and income can significantly boost your home loan eligibility."
Improve Your Credit Score
A higher credit score can enhance your chances of qualifying for a larger home loan and obtaining more favourable interest rates. Before applying for a home loan, focus on improving your credit score as much as possible. Pay your bills on time, reduce your debt, and avoid applying for new credit in the months leading up to your loan application. By demonstrating responsible credit management, you showcase your creditworthiness to lenders. Monga advises, "Paying off high-interest debt and avoiding new debt can improve your eligibility and increase your chances of securing a larger loan amount."
Save for A Higher Down Payment
Increasing your down payment can have a positive impact on your loan eligibility. By saving more money and contributing a substantial down payment, you decrease the required loan amount, which can result in higher approval. Lenders often view borrowers with larger down payments as less risky, thus increasing their willingness to extend a larger loan. Saving diligently and planning can significantly enhance your eligibility for a higher loan amount.
Explore Loan Products & Lenders
Different lenders and loan products have varying eligibility criteria. It is essential to explore multiple options and compare loan terms from various financial institutions. Some lenders may have more flexible eligibility requirements or offer specialized loan products that cater to specific borrower profiles. By conducting thorough research and seeking advice from financial experts, you can identify lenders and loan products that align with your financial goals and maximize your chances of securing a larger home loan.
