Buying a dream home is one of the major financial decisions. After spending months exploring different websites and surveying different locations, a person chooses his dream home. With property rates soaring high, buying a dream home for most of us may only be possible with a loan. The only problem which a customer may face before settling down in their home is getting their home loan approved.
While the home loan application process is easy and available online, getting approved for the same can be difficult. At times, even a small mistake may lead to a dismissal of the application. With proper planning, you can get your loan approved easily.
Here’s a comprehensive checklist to get your loan approved for your dream home:
- Keep a Check on Your Finances: Before applying for a home loan, one should check their finances, including outstanding debts and debt-to-income ratio. At the same time, it’s not a requirement for you to have a zero balance on the credit card. Moreover, it is advisable to have less debt, which will increase the chances of getting the loan approved.
Moreover, many lenders have a minimum salary requirement to check the debt-to-income ratio. For example, if you earn INR 80,000 per month and you pay EMIs on several loans for a total of INR 40,000, then your debt-to-income ratio is 50. A ratio of 50 or more may not be favourable for your home loan application. So, try to pre-close all the ongoing loans before applying for a new one.
- Build Your Credit Score: Having a good credit score between or above 650 – 750 and a good credit history improves your eligibility. It helps secure multiple housing loan offers from the top lenders at the best interest rates.
Notably, it takes time to build a good credit history. To boost your credit score, it may take approximately three to twenty-four months, depending on your current credit score. So, if a person is planning to take a home loan, then they must start working on their credit score a year before.
- Go for a Higher Down Payment: Generally, a home loan offers only 80% to 90% of the property value. The rest of the value must be borne out of one’s pocket. This amount is known as the down payment. Paying a higher down payment than what is required builds a lender’s trust. It will help in lessening the loan balance and speed up the home loan approval process.
- Use of Co-applicant Feature: A home loan with a co-applicant has a higher chance of approval. When one applies for a home loan jointly with their respective earning spouse or other earning member of the family, the loan is more likely to get approved. Generally, lenders prefer a co-applicant as there are two income sources, hence the higher chances of repayment on time.
Another benefit of a co-applicant is that it makes you eligible for a higher loan amount, as the repayment capacity is higher.
- Pay Proper Attention to Documentation: Two major reasons for home loan application rejection can be incorrect application forms and lack of required documents. Having the necessary documentation can ensure application processing is completed on time. Therefore, make sure to check the required documents on the lender’s website and get all the documents ready and prepared beforehand.
The standard documents required for most home loans include ID proof, address proof, three-month salary slips, and IT statements for the last few years. If you are a self-employed professional, your necessary documents include proof of business ownership, GST statements, IT returns, and revenue statements.
- Go for a Pre-Approved Home Loan: A pre-approved home loan is one of the best ways to get an application sanctioned quickly. Lenders offer pre-approved home loans on the basis of the repayment capacity. A home loan amount is decided considering one’s current financial records that are available with the lender. Generally, pre-approved home loans are approved within one or two days after you provide the required documentation and correct forms.
- Pre-calculate the EMI: Home loan EMI calculators help you check the EMI payable after entering the loan amount, interest rate, and repayment tenure. By calculating the EMI, you will know about the affordability of the loan.
If the calculated value of EMI is high, then you can reduce the loan amount or increase the duration of repayment. On the other hand, if you can afford a higher EMI value than the calculated amount, then you may increase the loan amount. Also, you may opt for a shorter repayment duration. So, pre-calculate the EMI using the calculator before applying for the loan.
A Step Closer Towards Your Dream Home
Buying a home is one of the biggest financial decisions a person makes. It is important to have proper planning before going for a home loan application, including managing the finances, pre-calculated EMI values, loan amounts, and interest charges. While applying for loans with better interest rates and flexible repayment tenures, you may look out for trusted lenders like Tata Capital for quick processing.
Connect with Tata Capital today for loans at affordable interest rates.
