Getting a home loan is one of the best ways to get the funds for buying your dream home. While many lenders in India offer several home loan schemes at affordable interest rates, there is no guarantee that the lender will approve your loan request.
The lender may reject your loan on various grounds such as low credit score, not submitting enough documents, non-payment of down payment, not meeting the eligibility requirements, etc. However, there are many ways to increase your chances of loan approval, which are discussed below.
Apply for a joint home loan
If the lender has rejected your home loan request because you don’t meet their minimum income requirement to get the desired amount, you can enhance your chances of approval by adding a co-applicant. You can apply for a joint home loan with an earning family member.
The lenders generally determine your eligibility based on your income and repayment capacity. By applying for a joint home loan, you can showcase higher income and increase the chances of home loan sanction.
Choose a lower LTV
LTV or loan-to-value ratio is the proportion of property’s value financed by the lender. Generally, the financial organisations in India approve a maximum of 80% of the property value as home loan. In some cases, if you have an existing relationship with the lender you can get a loan up to 90% of the property’s value.
However, your lender may reject your home loan application if you want to borrow a high amount and do not have the financial standing to repay the amount on time. However, you can increase your chances of approval by applying for a lower amount. This will help you lower the overall interest payment and the EMI would be much more affordable.
Check your credit score
The credit score is a three-digit number that reflects your creditworthiness. It is an important factor that affects your loan eligibility and home loan interest rates. Generally, the lenders consider loan applicants with low credit scores as high-risk borrowers and charge a higher interest on loan to mitigate the risk in offering loan to them.
So, if your credit score is lower than the minimum score required by the lender, it is vital that you focus on improving the score before you initiate the home loan process. This will help you avoid the chances of loan rejection. Also, if you have a credit score of about 800 or more, you would be in a better position to negotiate a better deal on your home loan and get a discount on the interest rate.
Know about the documents required beforehand and keep it handy
One of the most common reasons why lenders reject home loan applications is because of lack of required documents. Not complying to the documentation can cause unnecessary delay in the home loan approval process or in some cases it may even get your request rejected.
To avoid this situation, it is advisable that you know about documents required by the lender beforehand and keep them ready. This will help you ease through the loan processing period and the chances of your loan rejection will be minimal.
Final word
Now that you are aware of the tips to increase your chances of home loan approval, do your diligence and enjoy a hassle-free borrowing experience.