Finding the right home might have brought you one step closer to realizing your dream. The months of hunting for a home that matches your requirements like location, parking space, amenities and price, should have been tiring but the real question is-

Is finding the right home the end of it?

Not really!

The next major step is to get a home loan approved. Home loans are the most common way of financing the purchase cost of your home. Since it involves a large amount of money, the lenders are stringent in checking applications to prevent the risk of defaults. As a borrower, you need to understand the steps that can be taken to prevent your home loan application from being rejected. Your past credit history, current outstanding loans and several other factors can influence the success of your application getting accepted or rejected. 

8 Important Tips to Get Your Home Loan Approved

1) Try to Build a Good Credit Score

One of the main factors that lenders look into while determining the eligibility of your home loan is the credit score. Most lenders look into your CIBIL score which is a three digit numeric summary that reflects your past credit history, including loan repayment record. The score helps lenders to determine your creditworthiness to estimate your loan repaying capacity. 

Ways to improve your credit score:

a) Avoid defaulting on credit card payments.
b) Keep outstanding balances low on your credit cards.
c) Always repay your loan EMIs on time.
d) Do not take too many loans at a time.
e) Check your CIBIL report for any errors. If there are any errors get it rectified from CIBIL.

Avoid submitting a home loan application to multiple lenders. Each application gets recorded in your CIBIL report and too many applications can also negatively impact your credit score

2) Clear your existing debts

To further improve the chances of getting the loan application approved, try to repay any existing loans. Nowadays, people are using easy finance options to purchase consumer durables like smartphones, washing machines, air conditioners and televisions. 

You may not know but this is also characterized as a loan and can affect your credit score. It is recommended to close these loans by pre-paying them, reducing the loan amount outstanding in your name. If possible, the same can also be done for other personal loans you may have taken. You should also resolve any pending issues that you have with a lender. 

3) Pay a Higher Down Payment

A down payment is that portion of the cost of the home which you pay upfront to the developer. The rest of the amount is financed by a financial institution like a bank. Paying a higher down payment means you have to take a loan of less amount. It also helps you get a lower interest rate. Ideally, a down-payment of 20% is considered decent. Paying a higher down payment will make the lenders treat you as a low-risk customer, which will translate into loan approval and better loan terms.

4) Apply for a Longer tenure

When applying for a home loan, you have the option of specifying/selecting the tenure of the loan. Taking a longer tenure loan has several benefits for both you and the lender. You get to pay lower monthly EMIs and it also reduces the risk exposure of the lender. And, if your financial condition improves in future, you can always increase your EMI amount decreasing the loan tenure or make extra part-payments or even foreclose the loan without any penal charges in most cases.

5) Apply using the Co-Applicant feature

When you apply for a loan, lenders look at your earnings to determine if you will be able to repay the loan. If you apply jointly for a loan, the banks will allow you to club the income of the co-applicant. This can be especially beneficial if your spouse or parent also has a source of income. It directly helps to improve the chances of getting your home loan application getting approved.

6) Check Developer Profile

You should conduct thorough research on the profile of your developer. Check and see how many projects they have completed, deadlines met, outstanding cases against the developer and similar factors. Buying a home from a trusted lender is always recommended as it ensures your money is safe and banks know they are financing a flat that will get completed.

Sometimes developers also enter into exclusive tie-ups with certain banks. Applying for a loan with these banks can help to speed up the process and help to get your loan approved.

7) Carefully fill the loan application

Make sure you correctly fill in all the details in the application form. Filling incorrect information can result in your application being rejected. Give the correct contact numbers, addresses and other information mentioned in the form. You should also check all the clauses and terms mentioned in the application form. If you have any queries regarding the agreement, raise it with your lender and get it resolved. 

8) Understand your Finances

Figure out the amount that you can set aside every month to repay the loan. Home loans require you to pay monthly EMIs and failing to pay them could result in severe consequences. So you should identify the amount that you can set aside to EMI and any other additional monthly expenditure towards the maintenance of your home. Some lenders have also a minimum salary requirement which can vary based on your city.

Summing it Up

While applying for a home loan you should be diligent and disclose all the relevant information to the lender. If the lender asks for additional information, try to respond to it immediately. Being focused while filling the form and following all these tips can prevent your application from being rejected. This will help you realize the dream of owning a home!