How To Check Your Home Loan Eligibility With Co-Applicant, Existing Loan And Credit Score?
Your credit score and credit history play a significant role in determining your home loan eligibility. When you add a co-applicant to your loan, your eligibility will improve. Your previous loans and repayment history also play a factor in this.
While applying for a Home Loan, one has to pay attention to the interest rate they are offered. Since home loans are a great commitment that takes years to repay, getting the lowest interest rate is the best for you. But how does one get the lowest interest rates? How can I check my eligibility for a home loan when I am applying with a co-applicant? Will my existing loan have an effect on the loan amount or loan interest rate I can get?
These are some common questions every borrower has before they apply for a loan. The Indian banking system is mired with a lot of processes, rules and regulations. Each bank has their own set of eligibility criteria to determine your loan eligibility. Borrowers are required to assess each aspect of their finances before they are assured of a loan.
Adding A Co-Applicant To Your Home Loan Application
Home loans are a significant financial commitment with a large loan amount and a high interest rate. Taking out a home loan with a sibling, spouse, or parents might be quite helpful. This can result in larger loan amounts and lower interest rates.
If your co-applicant is also a working member, his or her salary will be taken into account, and you may be eligible for a larger loan. This is especially useful if your salary is low and insufficient to qualify for the loan amount you require. Obtaining a larger loan amount also implies that you will be required to make a smaller down payment on your home. You can afford a larger and better home.
When you apply jointly, both your credit scores and income will be considered, significantly lowering the final interest amount levied on your loan. This is because your loan application was processed with a reduced risk ratio.
Will Existing Loans Change My Home Loan Eligibility?
Home loan eligibility is mostly determined by your income and repayment capabilities. If you have additional loans, such as a car loan or a personal loan, it might have a substantial impact on your house loan eligibility. When bankers learn about your existing responsibilities, they try to determine whether the EMI will exceed 45-50% of your monthly take-home pay. This is a manageable sum that will not put a strain on your finances.
According to experts, your home loan EMI should not exceed 35% of your monthly income, and your overall EMI, including car loans, should not exceed 50%. If no alternative financing is available, you may borrow up to 50% using a home loan. This will enable you to save for long-term goals as well.
What Role Does Credit Score Play In Your Home Loan Eligibility?
Credit score is a parameter that helps lenders to determine the creditworthiness of a borrower. A credit score of 700 and above is considered a good score to land the best home loan. Such a healthy score will ensure that you get low interest rates with other benefits and value add services along with your home loan.
This score differs from lender to lender but 700+ is a sort of benchmark across most lenders and you can safely assume that this score will get you a home loan for sure.
You could get a home loan with a credit score lower than 700, but the loan conditions and interest rates may not be favorable. Taking out a home loan with a high interest rate is not a good idea. To avoid receiving a high-cost loan, you can take the requisite steps to raise your credit score to 700 before applying for the loan.
In order to do that, you should –
- Pay off any long-term loans or credit cards
- Check your credit report for any errors or misinformation
- Do not fall behind on payments
- Limit your credit utilization ratio
- Avoid applying for multiple loans at the same time
Some More Tips To Improve Your Credit Score Before Applying For A Home Loan
In today’s economy, home loans are one of the most important lending portfolios for any bank or NBFC. Interest rates have been trending below 8% for several years, fostering a strong real estate market. Borrowers are more educated and knowledgeable about the many home loan options on the market, and they shop around for the best interest rates before signing up for a loan.