Securing a home loan might be one of the most challenging and important financial decisions you make in your life, especially when you are gearing up to purchase your dream home. The process is easier said than done, but with the right strategies, you can considerably improve your chances of getting the home loan amount you want.
Whether you are an experienced homeowner or a first-time buyer, there are certain steps you can take to ensure your home loan eligibility is improved and you qualify for the maximum possible loan. This guide offers five actional tips that can help you secure the home loan amount you want. Let’s go.
One of the most important factors that lenders look at when determining home loan eligibility and the amount they are willing to lend is your credit score.
In India, credit score is usually measured by institutions like CIBIL and the scores range from 300 to 900 with a score of 750 and above considered excellent. If you have a higher credit score, you can increase your chances of securing a higher home loan amount at favorable interest rates.
Pay all your bills on time, including credit card bills, utility bills, and EMIs. Late payments negatively impact your credit score.
Try to use less than 30% of your available credit limit to lower your credit utilization ratio. This indicates you are responsibly managing your credit.
Avoid multiple loan applications, as this can poorly reflect on your credit score.
Check your credit score periodically to avoid discrepancies or errors. If you find any mistake, take it up with the credit bureau immediately.
Lenders calculate your DTI ratio to evaluate how much of your monthly income goes toward your existing debt. A lower DTI ratio indicates that you have sufficient income available to repay a new loan, making you a favorable candidate for a higher loan amount.
Typically, a DTI ratio of less than 40% is considered ideal by most lenders.
Pay off or reduce existing debts before applying for a home loan. The lesser monthly financial obligations you have, the more comfortable lenders will feel offering you a higher home loan amount.
Try to increase your income through freelance work, side jobs, or salary raises to improve your DTI ratio.
Consider a co-applicant if a close family member or your spouse has a stable income and a good credit score.
A larger down payment can help you get the loan amount you want because it decreases the risk of the lender. Most banks in India finance up to 75% to 90% of the property value, depending on the profile of the borrower, with the remainder to be paid as a down payment.
By offering to pay a higher down payment than the minimum requirement, you are demonstrating your financial discipline and reducing the amount you need to borrow. This increases the chances of your loan approval.
Also, a larger down payment reduces your EMI burden, making it easier to secure the loan. Before applying for a home loan, you can check your home loan EMI by entering a larger down payment than the minimum requirement. You’ll be surprised to see the difference.
Create a budget and cut down on unnecessary expenses.
Consider investing in mutual funds, fixed deposits, or other safe avenues so that your savings grow over time.
Allocate tax refunds or work bonuses toward your down payment fund.
Loan tenure plays a critical role in determining the home loan amount you can borrow. Most home loans in India offer tenures ranging from 10 to 30 years. Choosing a longer tenure means lower monthly EMIs and increases your chances of securing a higher loan amount.
Extending the loan tenure decreases the monthly EMI and improves your debt servicing capacity.
It allows you to qualify for a higher loan amount.
Longer tenures gives you breathing room in case of unexpected financial setbacks, making your monthly payments more manageable.
Lenders need thorough documentation to analyze your financial stability before approving a home loan. Maintaining a stable financial profile and presenting the right documents can help increase your chances of getting the loan amount you want.
If you are a salaried individual, you need to provide bank statements, salary slips, and ITR for the past three years. If you are a self-employed individual, you need to provide audited financial statements and proof of business stability.
You must submit property documents, such as the sale agreement, completion certificate, and property tax receipts.
Proof of identity and proof of residence are essential.
A stable employment history is required, which signals financial reliability.
Lenders look for a stable source of income over a few years to make sure you can repay the loan.
Frequent borrowing or high credit card usage indicates financial instability, while a disciplined approach to credit management improves your chances of securing a higher loan amount.
Multiple sources of income can also increase your eligibility for a higher loan amount.
Securing the home loan amount you want requires more than just applying and hoping for the best. By maintaining a high credit score, lowering your debt-to-income ratio, saving for a larger down payment, choosing the right loan tenure, and presenting strong documentation, you can significantly improve your chances of getting the desired loan amount.
These actionable tips are grounded in principles that lenders value when assessing your loan application, so following them will not only make the process smoother but also more likely to result in success.
However, before securing a higher loan amount, make sure to use a home loan EMI calculator to check your monthly EMIs. Ensure you are comfortable with the amount.
