17 FEBRUARY, 2022

Your eligibility plays a decisive role in your home loan approval. When you apply for the loan, the lenders check your eligibility and accordingly process your application. Many factors determine your eligibility. If you do not fulfill the eligibility criteria, the lender can reject your application or charge you a high interest rate. Similarly, many factors can reduce your eligibility and decrease the chances of application approval. Having old debts is one of them. Clearing off your old debts can help you increase your creditworthiness  and increase eligibility.


Here are some tips that can help you increase your eligibility while availing a home loan.


  • Repay your debts

When you have old debts, the lender can identify you as a high-risk borrower. You are already paying EMIs for other loans, and home loan EMI can further add to the total debts. In addition, having multiple debts affects your credit score and your debt to income ratio. All these aspects can create doubt on your repayment capacity and deter the lender from lending you money. One of the best ways to increase your eligibility is to repay your old debts. You must close your other loans or consolidate them to reduce the debts. Paying your old debts will show you as a responsible lender and enhance your credibility.


  • Show additional income

Apart from your salary income, you can add other income on the application form to enhance your eligibility. It could be any rental, freelancing or interest income that you earn. It can strengthen your financial profile and help you get the loan faster and with better interest rates.


  • Add a co-applicant

The lender clubs the income of both the applicants while determining your eligibility, in a joint home loan. Taking a joint loan also helps when you have a low credit score. You can take a home loan with your parents or working spouse to enhance your eligibility. Having a co-applicant can also help you avail a higher loan amount.


  • Pay higher down payment

Typically, the lender asks you to pay 15% of the property value as a down payment. However, you can pay a higher amount too. Paying more reduces the loan value and increases your stake in the property. This reduces the risk for the lender, and they are more likely to approve your loan easily. 


  • Maintain a stable profile

Before you apply for home loans, ensure that you have a strong financial profile. You must have a good credit score of at least 700. A good credit score reflects your credibility and enhances your home loan eligibility. Similarly, you must not make any drastic change in your profession or change too many jobs if you are planning to apply for home loans. Lenders prefer borrowers who have a steady and stable job profile and a fixed source of income.


Lenders consider various aspects while processing your application. Therefore, you must check your eligibility and ensure that you can afford the loan. Also, you must research well before you apply for home loan to make an informed decision.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.