Pay off your old debt to increase your mortgage eligibility

Housing finance companies and banks often have strict criteria when it comes to mortgage eligibility. Borrowers can do a few things that are crucial to increase their eligibility, such as paying off any existing loans.

“Borrowers can also submit proof of any variable compensation, which could include year-end bonuses as well as monthly or quarterly incentives. Also, it helps keep your Fixed Bonds to Income or FOIR (Total Debt / Monthly Salary) ratio below 40% because it shows that you are a responsible borrower, ”says V. Swaminathan, CEO of Andromeda, a distributor of loans. company that runs the digital arm Apnapaisa.

Here are five ways to increase your mortgage eligibility:

Add a co-applicant

Adding a working co-applicant, like your spouse, increases your mortgage eligibility as the lender would consider the combined credit scores. You may also have a good chance of getting a much larger loan amount as the combined income from two sources would be higher.

Show additional sources of income

When you report additional income, which you perceive as rental money or part-time business income, it invariably improves your financial health. “The extra income also positively affects your FOIR, helping you get a higher mortgage amount,” says Swaminathan.

Pay off an old debt

If your debt is high, lenders will assume that you don’t have the discipline or the resources to pay off your loan and that you wouldn’t be able to pay all of your EMIs.

Plus, paying off your old debts, including personal loans and credit card debt, will reduce your FOIR, as more of your income will be free to pay off the new EMI. Settling your old debts shows your lender that you are credible and makes it easier to get a mortgage.

Maintain a credit score above 750

The credit score is the de facto standard that any lender uses to assess a borrower’s repayment capacity. Maintaining a credit score of 750 and above establishes your high creditworthiness and can help you get approved for a home loan.

Make a higher down payment

Most lenders will finance 75 to 90 percent of the real value of the property. “So if you can put a larger initial down payment, it can help you get a mortgage easily,” says Swaminathan. Also, a longer tenure of the home loan will result in a lower EMI amount, which will make the loan more affordable for you. However, with this can come the burden of paying higher interest charges.

Other factors

If you are an employee, avoid changing jobs when applying for a loan. Most lenders prefer borrowers who have been part of an organization on an ongoing basis for at least two or three years.

In addition, your eligibility is higher if your income is higher, simply because your repayment capacity would then be higher. The total amount of your loan would be increased if your income is high.

Age is also an important factor when it comes to mortgage eligibility. The younger you are, the better your chances of getting a loan.

Then there is the occupation, of course. If you work in a fairly large and well-known government organization or private company, your credibility would be higher.

Make the right financial choices to be eligible for a higher mortgage amount.

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