A house is one of the biggest purchases you can make throughout your life, and if you’re in the market to buy one, either to live in or to use as an investment property, then chances are, you’ll need to take out a home loan.
Home affordability has risen sharply in the last two years with home rates declining and interest rates on loans falling to their lowest. So if you’re planning to buy a home, chances are you would want to get as much of a loan as possible. If you’re a first-time home buyer, cracking the home loan eligibility needs some bit of research.
A home loan is an amount of money lent to an individual borrower by a bank or other loan provider, in order for that individual to finance the purchase of a property. The lender and borrower will agree on a term in which the loan is to be paid back, typically, this will be a period of 25 to 30 years. The lender and borrower will also agree on a repayment schedule, which will generally be fortnightly or monthly but can vary.
Home loan eligibility is a key reference point for banks or non-banking finance companies (NBFCs) or housing finance companies (HFC) to ascertain the maximum loan amount a home loan applicant is permitted to borrow and assess her/his trustworthiness to pay back the loan.
Maintain your credit card score
There are many ways to boost your eligibility for a home loan. Most lenders check credit scores before approving an individual for a home loan. The CIBIL score determines how good you are with your investments, previous loans and your financial position. To maintain a good score you must have a clean financial record. Make sure your credit cards aren’t unpaid, clear off all your outstanding debt if any.
Hold off any career change
Most lenders like it if you’ve been with the same employer for a minimum of six months, not including probation periods. Sticking with your employer while going through the home buying process is crucial. Any changes to your employment or income status can stop or greatly delay the mortgage process.
Lenders approve your home loan based on the information provided in your application. Taking a lower-paying job or quitting your job to become self-employed throws a wrench in the plans, and lenders must reevaluate your finances to see if you still qualify for the loan.
Be wary of credit card limits
The higher your credit card limit is, the less money a lender can responsibly lend to you. With that in mind, reduce your credit card limit or close it down altogether if you’re applying for a home loan. But do it a bit before you apply for a home loan as closing credit accounts can affect your credit score. You stand a much better chance of being approved for a home loan if you stick to just one credit card with a reasonable limit.