Since the third quarter of FY2020, the real estate market has shown a steady improvement, especially in the residential sector. Furthermore, the Union Budget 2021 announced great news for first-time homebuyers and middle-income households that boosted property’s demand.
The government has extended the interest deduction of home loans till March 31, 2021. In addition, there is also a strong probability that there will be a reduction of prices for affordable houses as the government announced an extension of the tax holiday period for real-estate sectors on affordable housing segments.
Hence, it proves to be a lucrative investment period when one can apply for a home loan. Furthermore, government-backed schemes, affordable interest rates, and online application of home loan have played a pivotal role.
However, lenders sanction home loans after considering several essential factors. Therefore, to accelerate the application process, follow the tips below:
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Increase down payment
Loan to value ratio or LTV refers to the ratio of the loan amount to the value of an asset that is purchased. In other words, it refers to the portion of money financed by the lenders. This ratio also allows lenders to assess the level of risk of default by the borrowers.
For instance, if the LTV ratio is more, the risk of lending increases, thereby minimising the chances of getting quick approval for a home loan application. According to the set guidelines by RBI, financial institutions can only fund 75-80% of the property and the remaining 20-25% will be raised as a down payment by the borrower.
Hence, it is wise to make a bigger down payment, reducing your LTV ratio, EMIs and home loan interest rate.
Estimate your financial condition
Before even thinking about applying for a home loan, individuals must thoroughly assess their financial condition. One must gauge their monthly financial obligations, future goals, other expenses etc., to ensure paying EMIs on time. Generally, lenders prefer a debt-to-income ratio below 36%. Although it varies from one lender to another, if the DTI ratio is lower, loan application approval is higher.
Qualify eligibility parameters
Every lending institution has certain eligibility criteria that borrowers must meet for loan approval. These factors include- age, source of income, nationality, CIBIL score etc. Meeting these requirements will ensure quick home loan approval from lending institutions. Although the eligibility factors differ from one lender to another, certain eligibility parameters are needed to be met by the borrowers.
Maintaining healthy CIBIL score
Your CIBIL score is a numerical representation of your credit report. Financial lenders consider this score to measure an applicant’s creditworthiness and repayment history. Even though CIBIL rating is not a vital criterion to be fulfilled, borrowers should try to maintain a decent score before applying for a home loan. It will further enhance your home loan eligibility and guarantee quick home loan approval.
Add a co-applicant or co-borrower
Applying for a joint home loan will bring you a lower interest rate, qualify for a high loan quantum, improve home loan eligibility and ensure a faster loan approval. You can add a family member or spouse who has a stable income source and decent credit report. Both the borrower and co-borrower are likely to pay EMI, which further reduces the risk of defaulting a loan repayment.
Submit proper documents
Borrowers must present appropriate documents during home loan application to guarantee faster loan approval. Any discrepancy in documents would not only lead to a delayed approval process but could reject your loan application. Some of the basic documents required for a home loan application are listed below:
- KYC documents- Aadhaar card, Voter ID, PAN card, passport, etc.
- Property documents- Tax receipt, property-related documents, sales deed, etc.
- Income proof- Latest payslip, bank account statement, profit and loss statement, etc.
Note: These documents will vary for salaried and self-employed individuals.
Apart from knowing well about how to get quick loan approval, borrowers must know about other home loan-related factors such as process fees, foreclosure charges, income tax benefits, etc.
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