Home loan getting rejected? 7 tricks to boost your approval chances
Home loans are a long-term transaction that can extend for 20-30 years. As a result, it significantly impacts your monthly expenses and financial stability for years. A bit of preparation towards repayment, can go a long way. On that note, here are five expert-backed tips to help you secure that all-important loan approval.
Don't just show income, show stability
Lenders aren't just looking at how much you earn, they're also assessing how reliably you earn it. For example, if you've frequently switched jobs in the past, despite a modest salary, banks may hesitate to lend to you. That's because they want to ensure you can maintain EMI payments to repay the loan successfully.
If you're self-employed, show at least two years of consistent income, supported by ITRs and GST filings. Salaried individuals should furnish Form 16 and recent payslips. If you've just started a new job, it's wise to wait until your probation ends before applying, to ensure the lender of your job stability.
Check your credit score before they do
Your credit score is the first thing lenders check as part of the application process. Scores above 750 are preferred while those below 700 may raise concerns. If your score is low, don't rush into applying but take corrective steps first to improve your score. Suppose your score is at 680 due to missed credit card payments or high utilisation in the past. Paying off ₹50,000 towards your bill could lift your score by 20–30 points within a few months. Use that time to rebuild your score and monitor your credit report regularly to spot and rectify errors.
Pay off ongoing loans to boost eligibility
Before applying for a home loan, clear your existing debts. Lenders deduct your current EMIs from your income to assess repayment capacity. So, if you earn ₹50,000 but are already paying ₹15,000 as EMI for a personal loan, only ₹35,000 counts towards your loan eligibility, even if that loan ends soon.
If your income has increased, consider prepaying existing loans to close them faster, especially since most banks don't penalise early closures. Becoming debt-free not only strengthens your financial standing for future borrowing but also clearly demonstrates your financial discipline to lenders.
Avoid multiple loan applications at once
Applying to multiple banks in one go can only hurt your credit score. Each application triggers a hard enquiry, and too many in a short span make you look credit-hungry. Instead, use comparison websites or bank eligibility tools which run soft checks without affecting your score. Shortlist one or two suitable lenders and apply strategically. A single, well-prepared application is far more effective than several scattered ones.
Increase your loan eligibility with a co-applicant
If your income doesn't qualify you for the amount you need, consider applying jointly. A co-applicant, be it your spouse, parent, or earning sibling, can help raise your loan eligibility.
Reduce the Loan-to-Value (LTV) ratio
Based on your property's valuation, the lower the amount you borrow, the better your approval chances. While banks finance up to 90% of the property's cost, a high LTV means greater risk for them. Suppose your property costs ₹60 lakh and you apply for a ₹55 lakh loan, will take your LTV over 90%. But, if you bring in ₹15 lakh and borrow only ₹45 lakh, the LTV drops to 75%, which banks prefer. Lower LTV also means smaller EMIs and less interest over time.
Show extra income to strengthen your case
If your salary isn't enough to qualify for a loan, include other income sources, such as rental income, fixed deposit interest, bonuses, or freelance work. This increases your total income and improves your loan eligibility.
Getting a home loan approved requires a strong, stable financial profile. To do that, improve your creditworthiness, show steady income, avoid multiple applications, and borrow within your means.
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