Affordable housing finance refers to financial services aimed at making homeownership affordable for everyone, especially those coming from economically weak backgrounds. This finance model helps people afford a home through subsidies and grants provided to homebuyers either through government programs or financial institutions and banks. 

These subsidies and grants attract a low rate of interest and come with a long repayment period. Credit-linked subsidy schemes, loans provided by the National Housing Bank, Housing and Urban Development Corporation, City Industrial Development Corporation and various state development authorities are a part of the affordable housing finance initiatives taken by the central and state governments. 

The Pradhan Mantri Awaas Yojana has also made housing affordable for many. However, not everyone qualifies for these affordable housing finance schemes. Consequently, in this article, we will talk about what individuals planning to apply for a home loan must do to make themselves eligible for affordable housing finance.

Simple Tips and Tricks That Will Help You Avail of an Affordable Home Loan 

When it comes to home loans, the housing loan interest rate one gets offered plays a determining role in ensuring home loan affordability. Low home loan interest rates not only make home loan EMIs affordable but also reduce the total cost of borrowing money as well as the total interest that one pays on the loan. To sum up, if you wish to secure an affordable home loan, you must focus on securing a low housing loan interest rate. Here are a few things you can do to secure an affordable home loan. 

1. Your credit score is vital. It indicates your ability to repay your loan EMIs on time and without defaulting. A credit score in the range of 750 to 900 is considered ideal for a home loan. When you apply for a loan with such a credit score, not only are your chances of getting approved for a home loan increase but so does your ability to demand a low housing loan interest rate. So, before you apply for housing finance, check your credit score and make sure it is at least 750.

2. When people with a low debt-to-income ratio apply for a loan, the risk for the lender is minimal. The debt-to-income ratio gives lenders the percentage of a loan applicant’s net monthly income going towards loan repayment. A high debt-to-income ratio implies low repayment capacity. If you want to secure an affordable home loan, ensure no more than 40% of your income is going towards the repayment of debt.

3. Opting for a long home loan repayment tenor will work in your favour. When individuals go for a long home loan tenor, their EMIs go down and become affordable. So, loan repayment becomes easier for them and consequently, the chances of a loan default decrease significantly.

4. The LTV ratio you opt for will also help decide the housing loan interest rate to be offered to you and hence, the affordability of the loan. A high LTV ratio indicates that the borrower has asked for a high loan amount and therefore, the chances of loan default are high. If you opt for a high LTV ratio loan, your negotiating power and the ability to ask for a low-interest rate will be low. Thus, home loan borrowers must always save as high a down payment as possible and opt for a low LTV ratio loan.

5. Lastly, if you wish to secure a low housing loan interest rate on your home loan, make sure to use a home loan calculator and a home loan eligibility calculator as part of your repayment journey. A home loan eligibility calculator tells you the home loan amount you qualify for and can comfortably repay based on your age, income, city of residence and existing obligations. Home loan applicants who apply for a home loan amount they are eligible for have high negotiating power and can ask for the loan terms and conditions they find favourable. The same goes for people who use the home loan calculator and apply for a home loan amount that they can comfortably afford to repay. 

These simple steps will allow you to avail of a home loan on the most affordable housing loan interest rates and therefore, repay the home loan comfortably and without feeling financially stretched and burdened.