Purchasing a property requires large sums of money. Hence, most individuals prefer taking up home loans that let them avail of the required funds quickly with easy repayment plans. While applying for a housing loan, there are several aspects that borrowers need to assess. These will enhance your chances of obtaining attractive loan deals with favourable terms, while guaranteeing a smoother approval process.

How to Maximise Your Chances of Securing a Competitive Home Loan 

Home loan applicants should plan for their home loan holistically so that they can maximise their chances of securing a competitive loan. Here is a checklist that can make this task easier:

• Do Your Research

A home loan is a long-term commitment because you are likely to pay EMIs for several years, stretching up to 30 years. So, you need to ensure that you choose the right lender who offers the best home loan. One can compare loan offerings of other lenders to check their interest rates, processing fees, eligibility criteria, pre-payment rules and other details. Even the tiniest variation in interest rates can markedly increase or decrease the overall credit cost.

• Check Your Credit Score

Your credit score is a three-digit number, ranging from 300 to 900, that denotes your creditworthiness. If your score is closer to 900, you will find it easier to access attractive home loans.

Lenders evaluate your credit score before sanctioning loans. In the case of applicants with a poor credit score, lending institutions might offer home loans at a higher rate of interest with less than ideal terms. In some instances, they could even reject the loan application. At such times, it is advisable to take appropriate steps in enhancing your credit score and later apply for a loan to avail of suitable terms.

• Choose What You Can Afford

Sometimes, borrowers may be considered eligible for a higher loan amount than their actual requirement. In such cases, run a reality check before taking on a higher quantum of loan, which will naturally translate into larger EMIs. Consequently, this could stretch your finances and you may have to compromise on other crucial financial goals like creating a corpus for retirement, children's education and so on.

Therefore, despite being offered a higher loan principal, one should stick to the amount that looks reasonable. Calculate your monthly expenses and then finalise the EMI. Ideally, along with your other credit liabilities, if any, the instalments should never exceed 50% of your earnings each month so that you can manage your normal expenses too within the budget.

• Save for a Higher Down Payment

Financial institutions may sanction up to 90% of a property's value. The rest is borne by the borrower in the form of a down payment. By tendering a larger down payment, over and above the mandatory sum, you can avail of a home loan with a lighter principal amount. It will increase your chances of getting loan approval and restrict the interest outgo with lower EMIs.

• File the Loan Application Correctly

Provide all the required information correctly in your home loan application. Failure to give key details, inaccurate information or errors could cause a delay in the loan approval process and even loan rejection. When lenders receive a properly-filled out loan application form, validated with relevant documentation and eligibility, they are likely to extend preferential home loan offers to such individuals.  

• Add a Co-Applicant

A joint home loan increases your chances of availing favourable loan deals. The co-applicant should be an earning family member with a good credit score and repayment history. Additionally, including a woman co-applicant makes you eligible for concessional housing loan interest rates.

Summing Up

Lenders look for borrowers with responsible credit behaviour. Once they find your profile satisfactory, they will be more eager to offer you competitive housing loan terms. However, even after availing the most competitive home loans, individuals should read the loan documents carefully that outline the terms and conditions of their housing loan. Many a times, borrowers forgo this part that could create some confusion later.