How can you increase the chances of getting a home loan

Real estate prices have seen a downward trend in the past one year. The situation offers a perfect opportunity to people who want to buy a house. Though the realty market is far from being predictable, one can expect handsome appreciation on his/her investment when conditions improve.

Rishi Mehra, co-founder, deal4loans.com, shares six ways you can increase your chances of getting a home loan from a bank this year:

1. Build your reserves: It is important to plan your home purchase two-three years in advance. It gives one time to accumulate funds and compare existing home loan rates from banks. There are chances that the bank will offer you competitive rates when they fund up to 60 per cent of your home purchase.

2. Get co-borrowers: There are high chances that the bank may not approve your home loan in case you are stretching the limit of your income to borrow more. In such a case, you can get a co-borrower for your loan to ease your burden. Apart from division in your liability to repay, you will have the chance to get a bigger amount of loan. In fact, banks often allow six co-borrowers for a home loan. A co-borrower can be your spouse, parents, children and siblings. On the taxation front, now all co-borrowers can claim tax deductions on a proportionate basis under section 24 of the Income Tax Act against interest repaid and under section 80 C against principal repaid.

3. Pay off your credit card bills: Your unpaid credit card bills may pose a risk to chances of getting home loans. The credit card dues are types of unsecured loans and are tracked by credit bureaus such as Cibil and Experian. To improve your credit standings, clear your dues months before you apply for loan so that the correct data is reflected in your credit report.

4. Tidy up your bank account: Before you apply for a loan, ensure that there are no adverse entries in your bank account. Before you are given a loan, a bank will ask for bank statement for six months to check for any discrepancies, irregularities such as bounced cheques, a missing EMI among others.

5. Get your documents in order: Before you apply for a home loan, get these documents in order -

- A passport, voter id card or driving licence, job card issued by NREGA, Aadhar Card, PAN card (only as identity proof)or any other document as acceptable to the bank, in case of both salaried and self-employed individuals

- Bank statement or passbook for the last six months where salary or income is credited for both salaried and self-employed individuals

- Latest three months salary slips showing all deductions and Form 16 in case of salaried individuals

-I-T returns for the last two years and computation of income for the last three years certified by a CA for those self employed.

Additionally, the application form will include a photograph duly signed, processing fee cheque, about six cancelled cheques and an ECS mandate form for the account where salary or income is credited. Banks may also ask for education, qualification certificate and proof of business existence, in case of self employed. A copy of the allotment letter or buyer agreement and a receipt of payments made to the developer will also be required.

6. Buy from a reputed builder: Buying from a reputed builder increases your chances of getting a home loan as they have tie-ups with big banks. Another reason is a bank will be very interested to know the location and the builder from whom you are buying the flat. In case , you are unable to repay, the bank will occupy the flat and resell it to recover its dues.

(The article first appeared on economictimes.com. You can read the full article here)