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Home Loan Approval Tips for First Time Home Buyers
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After finally settling in his job, Sameer decided to invest in a house that he could call his own. After doing some research, he came to know that a home loan is an easy way to finance his dream home. However, he also knew that if his loan application gets rejected, it can deplete his credit score, affecting the chances of availing a loan in future. So, he decided to talk to his cousin, who was a bank manager to guide him on the home loan application process. His cousin gave him some tips that helped him get his loan approved without any hassles.
If you too are looking forward to applying for a home loan, these tips for a first time home-buyer can be helpful.
Your credit score is an important consideration for the lenders while processing your loan application. Therefore, before you fill the application form, ensure that you have a good credit score and a favourable credit report. If you have a credit score of 700 and above, there are high chances that your loan application will be approved, if all other eligibility criteria are also met. If your credit score is below 650, you might face some difficulty in getting the loan approved.
Your loan application would be approved only when you fulfil the eligibility criteria. The home loan eligibility is based on your age, income, financial status, other debt obligations, etc. Therefore, it would be helpful if you check your home loan eligibility before applying to avoid rejection. You can use home loan eligibility calculator online to do a quick check.
The EMI of a home loan depends on the loan tenure you choose. To increase the chances of loan approval, you can opt for a longer tenure as it will attract low EMI. With a longer tenure, you get more time to repay the loan. The lenders are more likely to approve your loan when they can envision that you can comfortably pay the loan EMIs. However, a longer tenure would increase your overall interest outgo. To avoid paying additional interest amount, you can foreclose your loan or make pre-payments during the tenure.
Lenders consider your Fixed Obligation to Income Ratio (FOIR) while processing the loan application. FOIR is debt-to-income ratio. It reflects the portion of your income that you are currently paying towards existing debt obligations. Lenders prefer borrowers who have a FOIR below 50% (including the EMI of the new loan). If your FOIR is more than this mark, you are more likely to default as more than half of your income would be going towards mandatory payments. To reduce and maintain the FOIR, consolidate your current loans or reduce the outstanding by making partial payments of the existing loans.
Buying a home for the first time through a home loan can be overwhelming. However, if you do some background research and groundwork before applying, you can significantly increase the chances of approval of the loan application. Follow the above-mentioned home-loan-approval tips and apply for home loan now.
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