How to buy a your dream home with bad credit Score in Delhi?

25 Jan

How to buy a home with bad credit?

Home Loan if Bad Credit

In the present day and age that we are in this world in, it is very significant to have a healthy credit score before you believe of applying for any fresh credit line. Particularly when you are opting for a long-term loan such as a home loan your CIBIL score plays a very significant role. With the Reserve Bank of India having made it compulsory for banks to look at the credit score of an individual as a part of their credit evaluation process, banks must use your credit score as one of the barometers of your credit health. But does this mean that an entity with bad credit cannot dream of purchasing property with the aid of a home loan?

Don’t opt for traditional lenders
If your CIBIL score has curved in below 650 it is best not to go to a customary lender like a bank. NBFCs are recognized to be a little more flexible than banks as they look at other events of creditworthiness such as job profile and scope of future income, and even accept collaterals such as large premiums or gold jewellery, but even then, such loans come at a higher rate of interest that you will find difficult to negotiate if your score is low. The other option is to approach a P2P or a peer to peer lender if you are looking for a loan for a shorter tenure. The advantage of P2P platforms is that it connects the borrower to the lender, because of which you, the borrower, can save the intermediation cost that you would have otherwise paid to a traditional lender. Assessment of this nature enhances your probability of getting a home loan even with a bad credit score.

Opt for a lesser LTV and lower FOIR
The LTV is a significant ratio that is taken into consideration in a home loan. Irrespective of the lender, SBI home loans, HDFC home loans or DHFL home loans, it is the Loan to value ratio captures the amount of loan as a ratio of the total value of the property. According the RBI diktat a bank cannot lend more than 85% of the LTV, but banks more often than not go after their own set of guidelines while deciding the LTV. If you have a lower credit score you can choose for a lesser LTV which will improve your down payment but make you eligible for a home loan at a decent home loan interest rate.

While assessing you creditworthiness, banks also think another ratio called the Fixed obligations to income ratio or FOIR which basically is a calculator of the total amount of “fixed obligations” or expenses you must create in a month (inclusive of your home loan EMI) as against the salary you draw. Banks fix the EMI of an individual in a manner which is lower than the actual FOIR, even when a potential borrower has a good CIBIL score. In case of poor credit score, you could ask for the lender to think an even lesser FOIR, which will then translate into a lower loan amount.

Introduce a guarantor
A bank may have the same opinion to sanction a home loan to you still if you have a bad credit score if you can promise the presence of a guarantor. Pointless to say, the guarantor must have vigorous finances and a healthy credit score. He must also be aware of his responsibilities in case you are not capable to make a repayment on the loan because of some compulsory that you may face later on.

Improve your credit score
If none of the above options seem reasonable to you, you can take a footstep back and make a decision to get better your credit score before making a new application for a home loan. In fact, if you have the alternative to do this, this should certainly be considered seriously. The reason for this being that though a person with a bad credit is eligible for a home loan, he must make cooperation either on the interest rate or tenure front, eligibility ratios and even the lender. A good and healthy credit score and a healthy credit record on the other hand may help one clear the initial obstacle of eligibility and help him admission cheap and appropriate credit. If you are in a similar position and are at a loss about how to improve your credit score, you can always seek the help of credit repair or a credit development agency. Such an outfit will not only help you repair your credit score, but will also put you on a path that will not lead to similar credit related issues in the future.

Deciding to get a home loan to purchase one’s first property is perhaps the largest life altering decision that one is called upon to take in a lifetime. Doing so with a good CIBIL score is a sensible move.

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