When applying for a house loan, one of the most crucial eligibility factors is your credit score. If your CIBIL score is high, you can benefit from a number of intriguing benefits and services. Depending on the conditions, different banks offer various interest rates on their home loans. A home loan application’s interest rate is decided by the bank based on the applicant’s eligibility.All of the major banks in the nation, however, have the same basic eligibility standards. The lender or bank determines your eligibility after receiving all of your information and using precise ratios.As a result, securing a loan is difficult for the majority of persons with poor CIBIL score

How much CIBIL score is required for a home loan?

A CIBIL score of 750 or higher is required for a home loan. However, a credit score of 700 or higher is still acceptable to most lenders. However, the actual figure varies depending on the lender. A higher CIBIL score means a faster loan approval and better terms. As a result, having a higher CIBIL score in terms of the upper limit is always preferable. 

How to Improve your Home Loan Eligibility

Your CIBIL, or credit score, has a direct impact on the interest rate on your home loan.This is because your credit score represents your credit history. It is critical for home loan applicants to understand how to improve home loan eligibility so that they can own their dream homes :

  • Enhance Your CIBIL or Credit Score

A good credit score always improves home loan eligibility. To accomplish this, one must ensure that all loan repayments are made on time. Maintaining a low credit utilisation ratio (CUR) will benefit your credit score as well.

  • Opt for Co-applicant Home Loans

If you have multiple earning members in your family, applying for home loans jointly significantly increases your chances of being approved for a home loan. Applying for a home loan with your spouse and/or parents is the best option.Co-borrowing not only improves home loan eligibility, but it also divides repayment burdens and provides tax  benefits.

  • Clear Your Previous Debt Liabilities

The debt-to-income ratio is essential for lending institutions to evaluate a home loan applicant’s eligibility for a home loan. As a result, it makes sense for an applicant to clear all loan obligations that will positively impact her/his home loan eligibility. She or he should improve his or her credit score by repaying outstanding debts.

  • Keep Your FOIR Below 40%

The Fixed Obligation to Income Ratio (FOIR) is the ratio of your debts to your income and is an important factor in determining home loan eligibility. Most financial institutions’ lending models assume that you need close to half of your income for living expenses. When applying for a home loan, try to limit your FOIR to up to 40% in order to increase your chances of loan approval.

  • Avoid Job Change

If you are a salaried individual looking to apply for a home loan, you should work in the same organisation for at least two years. The amount of home loan eligibility is affected by frequent job changes. As a result, you should plan ahead of time so that you can demonstrate two years of continuous service in an organisation.

  • Higher Down Payment

A financial institution or lender provides financing for a mortgage loan between 75% and 90% of the value of the home. However, you might be responsible for paying the balance. Lower down payments result in higher loan values and, thus, higher interest payments. Making a larger down payment is therefore usually advised to avoid paying a higher interest rate.

Conclusion

You can easily become eligible for a greater loan amount, a longer loan term, and better terms and conditions if you do the above-mentioned tips to enhance and boost your chances of qualifying for a house loan. You should begin the procedure by first raising your credit score and, if necessary, correcting any inaccuracies.

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