A mortgage loan or simply mortgage is a term used by the buyers to buy real estate properties. For a buyer, to be eligible for getting a mortgage or home loan is crucial as there are multiple underlying factors that are taken into consideration. Financial planning is necessary in order to decide on the desired home and the funds to fuel its buying.
Before we get into the question of how can you be qualified for a bigger loan, let’s take a look at how to asses your financial situation first. The important factor is that financial planning is not something that could be done just before buying a home, it is a constant process that should be started from an early stage. It is a fundamental rule that maintaining a financial discipline is essential to fulfilling your home buying dream.
Assessing your financial situation means that you should tick all the necessary boxes which include:
- Monthly Expenses: In order to properly gauge whether you are financially ready is to keep an eye on your monthly cash outflow. Try to limit this outflow up to 25%-40% of your income.
- Decide your loan amount: The home loan amount depends on multiple factors such as the property price, age, income, credit score, and more. Any lender would provide up to 80%-90% of the property price. Hence it is important to decide on your budget and decide on the loan amount.
- Existing Debts: Knowing about your existing debts and loans beforehand can be beneficial. It is important to clear all the existing liabilities before you can apply for the home loan.
- Contingency Funds: Making a separate emergency fund account is a good option which can be helpful at the time of any uncertainties.
- Regular Income: It is very much important to keep a regular income source in order to maintain a balance with the monthly cash outflow. In the absence of an income source, the plan of buying a home could go for a toss.
Apart from the above-mentioned factors, there are other financial elements as well and it is quite important to keep a check on them.
Now let’s answer the first question- How can you qualify for a bigger loan? Being eligible for a home loan is not an easy task but a complicated process. The lender shall consider your assets, the current liabilities, and your income. However, in order to qualify for a bigger loan you can check out the following:
- Rental income: In case you have a house sitting ducks in your hometown you can lease it and generate an additional source of income which can improve your loan amount.
- Increased Tenure: Your age is an important contributing factor when applying for a home loan. Lenders tend to lean towards youngsters who have a potential repayment capacity. However, the maximum repayment period allowed cannot exceed 30 years.
- Joint Home Loan Application: If you are married and if your spouse is also earning then it is a good option to go for a Joint Home Loan increasing your home loan amount significantly.
- Don’t Hurry: Take your time to research the market, check your credit score, rectify any errors in your financial planning and get a clean credit report. If your credit score is high enough then the lenders would be more than happy to offer you a home loan along with other diversified benefits.
- Opt for Step Up loans: Under this scheme, the lenders would provide loan at lower EMIs and gradually increase the EMI as the loan is repaid.