Availing a home loan can be challenging for a few people. They would have to make a huge decision that will change the dynamics of their financial situation for years. This is because of the EMIs they’ll be paying every month. It will definitely affect their monthly budgets. Getting approved for a home loan will be easy as long as you fit all the eligibility criteria set by the financial institution that you choose. A good credit score and a clean credit history will also help you on your way to an instant approval. It’s always better to get to know a few pointers on how to get easy approval for a home loan.
Tip #1: Maintain a Good Credit Score
Some people might not consider checking their credit scores before opting for a home loan assuming that they are in good credit health. But when it comes to the point where their credit score and credit history are under scrutiny and if it’s not up to the mark, they will be facing rejections from lenders.
A credit score will always impact the decision of whether you’ll get approved for a home loan or not. Having a good credit score will indicate to the lenders that you’ll be able to handle a home loan by paying your monthly EMIs regularly. Your credit score will be a reflection of your credit history. Your credit history consists of information on all the previous credit that you have been handling. Information on whether you’ve been paying your outstanding dues on your credit cards regularly or about the consistency on paying off the previous loans that you’ve borrowed. A perfect credit history will give the lender an assurance that you’ll be able to handle a home loan. You’ll get your mortgage sanctioned without any difficulty.
There may be discrepancies in your credit history that will affect your chances of getting a home loan. Checking your credit history for errors and rectifying them as soon as possible is imminent. You wouldn’t want a few errors in your credit history to hinder your progress of trying to get a home loan. If you haven’t paid off your previous debts, that will definitely be on your credit history. So before considering applying for a mortgage, it is wise to get rid of all your debts.
Tip #2: Stay Employed and Have a Steady Income
When your lender does a background check on you, they’ll be looking into your current employment and income too. If you’re not employed at the moment and you’ve applied for a home loan, that will not sit well with the lenders. They would definitely doubt the integrity of how you would manage to pay your EMIs without a job supporting you. Lenders will always set an eligibility criterion of minimum income the applicant should be earning. If you fit the criteria, you’ll be able to get approved for a home loan.
Tip #3:Avoid Getting New Credit and Settle Old Debts
Getting new credit, for example, a personal loan, at the time of availing a home loan is not a good idea. This is because this will bring about a hard enquiry. Hard enquiries are made when a lender is reviewing your credit as you are applying for a new credit with them. When a hard inquiry is made on you, your credit score will drop. This won’t look good on your credit history and when this gets reviewed by lenders who are responsible for approving your home loan, this hard enquiry might get in the way. Plus, handling your mortgage payments and your personal loan at the same time is not a good idea. Double EMI payments will weigh you down, giving way to a debt trap.
It is recommended you settle your old debts before you plan on getting a home loan. If you are in the process of settling old debts, it is better to wait till the debt is paid in full before you pursue your dream of getting a house.
Tip #4: Make Sure You Can Afford The Loan Amount You Need
You are going to be paying your EMIs, so you should know how much you can afford to set aside for EMIs every month. Keeping your monthly budgets in mind, you would have to make a plan where you would be able to balance your spends. If you think you won’t be able to make the EMI payments, then you could wait for a while and save up money. Because getting a home loan without being financially ready will become very hard. Being financially stable is really important when you are planning on getting a mortgage.
Tip #5: Try Saving Up Before Applying For a Loan
Once you decide you are ready to buy a house, you can start saving up for it. By the time you are financially stable to take up a home loan you might have enough money to make a down payment. Banks in India are authorized to lend only 80% of the purchase price of a property. The balance of 20% would have to be paid by you as a down payment. For example, if you are borrowing Rs. 50 lakhs from a bank, you would have to pay Rs. 10 lakhs as down payment. The remaining amount of Rs. 40 lakhs will be provided by the lender. So, if you’re trying to avail a home loan, make sure you have enough money saved up to make a down payment.
Tip #6: Have Your Documentation Ready
When the collateral provided is the house your going to buy, then there should be proper documentation relating to the property. Those are not the only documents that will be needed. Financial institutions that are willing to lend you money will need your income proof and other documents. Only if you have the required documents , you’ll be considered for getting approval for a mortgage.
Choosing the right home and getting enough funding to buy that home will be challenging. But it all depends on whether your home loan gets approved or not. Obstacles like not having a good credit score or having a bad history should not stop you from getting your dream house. And always make sure you can maintain your budgets along with the EMIs you pay.