If you are applying for a home loan the chances of it getting approved are higher if there is a co-borrower. For one, the repaying capacity of two people will be higher than one, which will put your lender at ease about the loan getting repaid on time. If the co-applicant is a lady and she is the first applicant, then chances of the loan getting approved are even higher. Reason: women are seen as more responsible when it comes to repaying loans.
Recently, the director and chief executive of LIC Housing Finance, V K Sharma, said at a property fair that loans given to women or where the woman is the first applicant, are regular and disciplined in repayment. The housing finance company is also offering loans to women at 25 basis points lower than normal rates, under the Bhagya Lakshmi scheme, till March 31.
Banks may give preference to applications where the woman is the first applicant, because in case of a default the bank will inform the first applicant. And generally, nobody will like it if the women in the family get calls from the bank about loans not being repaid, says Vipul Patel, of Home Loan Advisors, an independent mortgage advisory firm.
A home loan application is usually standard and one is required to show three years of income tax returns filed, three months of salary slip and other proof of identity and residence. If all documentation is in place, there is no reason why the bank should reject the application, right? But banks still may find ways to reject your application on the basis of what they perceive as your repayment capability or past credit history.
While the only way to ensure a good credit history is to actually be regular with your repayments, you can still take some steps to improve the chances of getting your loan approved.
Today, many banks ask for a co-borrower. It is better if the co-borrower or co-applicant is a younger member of the family, even if his or her salary is less. “This will give the bank the comfort that the repayment capacity will increase, going ahead. You may even get a longer tenure loan. So, if the father is applying for a loan, it is better to include the son as co-applicant,” Patel says.
If there is a family member who is earning, but does not fall in the tax bracket, then the entire income can be shown as savings. If the bank is convinced that the family is able to save Rs 1-2 lakh, every year, it is possible that the loan amount may get enhanced. This may happen if the co-applicant is a woman and is doing a small business at home, or is a youngster who has just started working.
If you are self-employed, in addition to showing proof of bank balance, IT returns and statement of profit and loss, showing proof of your top clients and suppliers will make your case stronger, says Harsh Roongta, chief executive officer, Apnapaisa.com.
For instance, as a businessman, if you show your various registrations, such as those under the Shops and Establishments Act or Modvat and so on, those will act as proof of your stability and the tenure of your having been in business.
Along with your profit and loss statements, attaching a note explaining the fall in profits, if any, will also show that you have nothing to hide. Similarly, any cases of cheque bouncing in your business transactions should be explained in detail. “That will preempt a lot of questions the bank may have,” Roongta says.
But despite all this the bank may still find ways to reject your loan or else may approve a smaller amount, which may not meet your requirements. Be prepared for that, too.