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Many people work hard and save money to buy a home, which is their biggest dream. Buying a home is not so easy, as you may require a good financial background for it. To buy a home, the first step is to analyze your financial capability. The next step is to make a suitable plan based on your financial status. According to the current inflation, it isn’t easy to buy a home using your savings only. To manage the financial conditions, almost 90% of people borrow home loans.
A home loan approval process is a lengthy one, and the process starts with analyzing your financial background and property. The next step is to choose the right lender to apply for a home loan. Finally, you get qualified for the home loan based on certain features such as applicant’s age, job stability, family’s or applicant’s income, and loan repayment factors.
For getting a home loan, eligibility criteria play an important role. Home loan providers follow some strict rules while approving a home loan. So, there are some home loan tips that you can follow to increase your eligibility for it. Here we will discuss the same tips for first time home buyers.
Calculate the Amount for the Total Home Ownership Cost
While buying a home, the cost of the home is not only the needed money to pay for it. But the homeownership includes other expenses which one has to pay with the cost of the house. Generally, a home loan includes only home cost charges and doesn’t include other expenses. One has to take care of those additional expenses. The additional expenses include registration fee, GST, stamp duty charges, and other charges to pay for the municipality. Thus, while making a budget, you need to include all such expenses to handle them easily.
Check Your Credit Score
This is one of the useful home loan tips for first-time buyer. Based on your credit history, some credit bureaus provide you with a numeric value known as credit score. Such credit bureaus analyze your financial history, and based on it; you will get a credit score. The credit score may range from 300 to 900. A credit score of more than 700 is the best score, and the customer has a high chance of getting a home loan. So, the applicant has to check the credit score thoroughly to apply for a home loan. If the credit score is too low, then the applicant should take some steps to improve it. Applying for a home loan with a bad credit score may increase the chances of rejection.
Ensure that the CIBIL Report Error Free
Sometimes, your credit report may have errors. Though credit bureaus update your credit report with some time intervals, missing a single update will impact your credit score badly. So, check the credit report for errors, and report them to your credit bureaus to update your credit score. This will provide you with an error-free CIBIL report, which in turn supports your home loan approval. Lenders check not only your credit score but also the credit report so, ensure that you maintain the CIBIL report error-free.
Get Pre-approved for the Home Loan
One of the best home loan tips and tricks is to get a pre-approval for your home loan. This ensures that you will get a home loan for sure. Pre-approval of your home loan is based on your repayment capacity. After analyzing your budget, it has become easy for you with a pre-approved home loan.
Fix your FOIR
The two main factors for which lenders concentrate more to approve your home loan are credit score and FOIR. FOIR stands for Fixed-Obligation-to-Income. FOIR is a ratio of the total loan amount to your net monthly salary amount. If this ratio is more than 50, then the lenders may not approve your application. When you want to apply for a home loan, calculate this ratio first to check your eligibility. Also, if the FOIR is equal to or above 50, you should close other outstanding loans and clear your credit card due. This will help to decrease the FOIR ratio.
Get Prepared for the Down Payment
As already said, your home loan doesn’t cover all your homeownership costs. So, you need to spend some money from your pocket known as down-payment. A borrower can get the maximum price of 80-85% of the total house ownership cost. So, you need to pay the remaining 15-20% of the amount as a down payment. Sometimes your property price is much higher, in which you need to arrange almost 20% of the price own. It seems difficult for you to arrange the amount. Hence, analyze your financial status and get some good home loan advice from home loan consultants.