Improve your Credit Scores
Most banks and NBFCs consider credit scores as one of the most important criteria when setting home loan eligibility criteria. Home loan applicants with credit scores of 750 and above are usually considered creditworthy by lenders and are more likely to get home loan approval. Furthermore, it can also help applicants get lower home loan interest rates as most lenders set their interest rates based on the credit score of the applicants.
Applicants can build/improve their credit scores by repaying credit card bills on time, avoiding multiple loan/credit card applications within a short span of time, and following other healthy credit practices.
Additionally, applicants should also periodically review their credit reports to identify any errors and sent it to credit bureaus for correction. Rectified credit reports improve credit scores and increase eligibility for home loan .
Adding a Co-Applicant
Adding a co-applicant enhances home loan eligibility , as the co-applicant is also responsible for timely loan repayments. This reduces the credit risk for the lender offering a home loan. Prospective borrowers with low credit scores or insufficient monthly or annual income can add a co-applicant to their application to improve their chances of home loan approval. Many lenders usually allow applicants to add close family members as co-applicants.
Opt for a Longer Home Loan Tenure
Kotak Mahindra Bank Home Loans have loan tenures of up to 25 years. Lenders usually approve applications of those prospective homeowners whose total EMI obligations, (also including proposed home loan EMI) do not exceed 50% to 60% of their total monthly income. Applicants can opt for longer repayment tenures to reduce their EMI burden. This helps to improve their repayment capacity and increase their chances for approval on their home loan application. Applicants should also check the home loan EMI calculator to know their optimum tenures and EMIs based on their repayment capacity.
Adequate Funds for Down Payment
The RBI has capped the LTV ratio for lenders at 90% of property value for home loans up to Rs 30 lakh, at 80% for loans between Rs 30 lakh and Rs 75 lakh, and at 75% for loans above Rs 75 lakh. The bank can only fund up to 90% of the property value, hence applicant has to arrange for the remaining component through a margin contribution or down payment. Applicants can improve their chances of home loan eligibility by making higher down payments as a higher down payment reduces the credit risk for the lender.
