Buying a house on a single income is not a myth. There are enough and more single income households in our country and then there are new age singles actively looking for a crash pad of their own.
Though banks ideally prefer two or more borrowers, they don’t always deny Home Loans to single income applicants. If you are from the latter league, you can increase your chances of getting a Home Loan with some amount of foresight and some meticulous planning.
Keep these eight points in mind if you are the sole applicant for your Home Loan.
Additional Reading: 10 Loan Tips for First Time Home Buyers
- Hire A Broker
Brokers are the eyes and ears of the real estate business. Apart from information on available properties, they will also be aware of banks that will readily accept your profile for a Home Loan. We understand that hiring a broker is an extra cost when you are looking to cut corners. But doing so has two advantages. One, a broker will help you find a house within your budget, and second, they’ll also help you seal a good loan deal.
A broker can also play the role of an advisor. They can guide you through the loan application process and help you spot errors that could send your dream of buying a home down the drain.
Luckily, applying for a Home Loan is a lot easier in today’s times than before. You can visit BankBazaar.com and compare Home Loan offers based on your eligibility and requirements. Once you make the pick, you can submit your application and our excellent customer service representatives will follow up on your request.
Additional Reading: 9 Common Mistakes to Avoid While Investing in Real Estate
- Rein Your Credit Card Bill
Being a single income householder, you’ll have to muster all your charm and reasoning skills to convince the lending bank of your credibility. You’ll have to show that you can afford your regular expenses and your Home Loan EMIs with your single salary. This is by no means an easy feat. You can present a strong case by lowering your Credit Card bill. Diligently repaying your Credit Card bills will help improve your Credit Score.
Another way to appease the lending bank is by keeping your credit utilisation ratio below 30%. This is the ratio of your Credit Card bills to your credit limit. So, ensure that you stick to spending less than 30% of your credit limit.
Banks might also look into your bank account statements to get a clear picture of your spending pattern. Make sure you have this corner covered before you submit your application.
- Bigger Down Payment
The norm is that you make a down payment of 10 to 20 percent of the house cost and fund the remaining amount with a loan. Some banks offer 100 percent funding but levy a heavy rate of interest on the loan amount.
An ideal approach to Home Loan for single income applicants should be to increase their down payment amount. 20 percent and anything more than that is a good number. So get down to work and squirrel away all that money that’ll go towards your down payment. When you save more for your down payment, you’ll spend less and that’ll show up on your financial report card.
Additional Reading: 10 Ways You Can Save For A Down Payment
- Pre-Approved Loan? Think Again
Banks can sometimes surprise you with their generosity. Based on your credit history and credit behaviour they can pre-approve a generous Home Loan amount for you. In some cases, this amount could be way beyond your wildest imagination. But restraint is what you must practice.
Pre-approved loans don’t come free of cost. In some cases, they come with a premium price tag, say higher interest rate. Hence, it’s important that you explore all possible loan options before going for the pre-approved offer. However, if a pre-approved Home Loan is the best deal available to you, then nothing like it. Your entire loan disbursement process will be made quite hassle-free, provided you still make the cut. Yes, pre-approved is not a definite yes.
Additional Reading: Pre-approved home loan vs. Regular home loan
- Stay Within Your Means
When applying for a Home Loan you might learn that you’re eligible to receive a bigger amount than what you need. So does this mean that you must ask for the additional amount as well? Not a good idea. Remember that loans aren’t given free of cost. You have to return more than what you borrow after factoring in the interest rate and other charges.
Always evaluate your budget before you fill in the loan amount section. Remember you should be able to afford the EMIs along with your other expenses.
- Home Loan Insurance
Single income earners – pay special attention to this point. A Home Loan Insurance is your safety against emergencies. In the case of a mishap, where you aren’t able to repay your loan EMIs, the burden will fall on your family members. A Home Loan Insurance will protect you and your family from financial stress in case of loss of your income.
How does this work? You can either opt for an insurance plan provided by your Home Loan lender and club the insurance premiums with your EMIs or explore offers from other Home Loan Insurance providers. In case you find yourself unable to repay your Home Loan EMIs, your Insurance plan will come forward to cover the deficit.
It is important that you read and understand the conditions under which you can make claims on your Home Loan Insurance. Death of the loan applicant, diagnosis of a critical illness, or a disability arising out of an accident are some situations when a Home Loan Insurance Plan will have your and your family’s back. Always read the terms and conditions before signing up for a policy.
Additional Reading: All About Home Loan Protection Plans
- Get A Guarantor
Sometimes single income applicants might find that their salaries or Credit Scores aren’t enough to get them the loan amount they want. You could be the most responsible borrower alive on planet Earth, but how will you convince the banks of it?
Get a guarantor. A guarantor is someone who agrees to be responsible for the payment of someone else’s debt should the latter default on payments. The presence of a guarantor gives the bank an additional option for recovery of the loan money. With a guarantor in the picture, banks can give you the loan you want. Keep in mind, banks will check the credit history of the person who has agreed to be your guarantor.
Remember that signing up as a guarantor for somebody is a big deal. Hence it’s important that you make repayments on time to keep your guarantor out of trouble.
- Job Tenure
The job you hold matters when you apply for a Home Loan. The number of years for which you’ve held your job matters too. As you might know, the longer the better. If you have jumped too many jobs, banks might get their guards up, as you pose the risk of losing your income. Most often banks require you to be in the same job for at least 6 months to process your loan application.
Armed with these tips you are sure to have your Home Loan application approved. Don’t know where to start looking for a loan? Well, we are right here.