5 Ways to Increase Your Chance of Getting a Home Loan Approval


Rising home loan interest rates has adversely affected the eligibility of many borrowers. Because the borrower's eligibility is inversely related to interest rates, a rising interest rate results in stiffer home loan eligibility. Here are 5 sure ways to increase your chance to get a home loan approval.

1. Increase your loan term.

Opting for a higher loan term enhances your eligibility. This is because as the tenure of the loan increases, the equated monthly installment (EMI) decreases. When this happens, your "ability to pay" automatically increases and so is your eligibility.

2. Repay your other outstanding loans.

Unpaid loans like car or personal loans may adversely affect your eligibility. The mortgage industry uses the standard of taking into consideration all loans with over 12 outstanding installments when computing your eligibility. You can be sure that your application remains unaffected by prepaying in part or in full all your existing loans.

For example, if you have 16 unpaid EMI's for a car loan, you may prepay 5 EMI's to ensure that what's left unpaid are 11 EMI's. Eleven EMI's are not considered in the computation of your eligibility, as the standard dictates.

3. Pool the family's incomes.

Another way of increasing your chances of getting a home loan approval is by pooling the family's income together - the father's, mother's, and children's incomes. For instance, you want a home loan worth $1,000,000. But based on your income, you are eligible only for the amount of $500,000. Assume that your spouse is also earning a similar annual income. In this case, you can pool your income along with your spouse's income to get the approval for the home loan.

4. Step-up your loan.

A step-up loan is a loan whereby you pay a lower EMI in the early years and enhancing the same during the rest of the term of the loan. As an example, a $1,000,000 home loan at 7.5% payable in 20 years may require an EMI of 6,760 in the first 2 years. The remaining 18 years of the tenure would require EMI's of $8,340. The lower EMI's at the initial stage of the loan would increase your capacity to borrow.

5. Include all sources of income.

When computing your income, you have to consider all sources of income, including all performance-based pays like perks and incentives. By this you will also enhance the loan amount you are eligible for.

You have to note that these are just suggestions. You have to make a scrutiny of your financial standing to find the best suited package for you. Speak with a home loan consultant before acting on the options available for you.

Jason O. Joaquin is an accountant and freelance business consultant. Currently, he is employed as Internal Audit Manager of a group of companies in southern Philippines.
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