Taking care of a family and managing it can be a tasking and time-consuming job. That’s why some women opt to become full-time housewives. However, the unpaid nature of this role means a housewife doesn’t have a stable income. Even then, it’s still possible to get a loan as a homemaker. But, can a housewife apply for a home loan?
Yes, but the chance of eligibility is low. The best way for a housewife to get a home loan is with a joint application. However, you can try loans like fixed deposits and gold loans. There are ways to improve your chance of being eligible such as getting the source of income, clearing debt, etc.
Applying for loans is easy; what’s difficult is meeting the requirements for eligibility. Homemakers are in a unique position when it comes to this. Here, we discuss whether a housewife can apply for a home loan and how to improve their chance of getting one.
Is a Housewife Eligible for a Loan?
It’s difficult for a housewife to get a loan because they don’t have a source of income. But it’s possible. Lenders usually require that the loan applicants have a steady source of income which implies that they’re either self-employed or getting wages. This is because a consistent source of income reduces the risk of default. At times, the lender may even ask applicants for proof of income. For a housewife, it’s hard to meet these requirements. However, some lenders give personal loans to homemakers. In addition, lenders may require an asset as security for the loans.
Type of Personal Loans for Homemakers
There are several personal loans for housewives depending on the financial institution. The standard options are:
1. Fixed Deposit Loan
When giving a loan, the most important thing for a lender is to know that they won’t lose their funds. For them, it’s an investment to make a profit. So, a housewife will only need to prove to the lender that they can successfully repay. If a housewife has a fixed deposit in their name, it can serve as collateral for a loan. A fixed deposit loan ensures access to funds when needed while letting a fixed deposit matures. Therefore, it’s essential to understand how to get a fixed deposit loan.
It’s easy to get this loan for a personal purpose, but the chances of using it to get a home loan are very slim. In order to use it to get a home loan, there has to be a substantial amount locked in the fixed deposit. Only then can the lender overlook the lack of a consistent source of income.
2. Gold Loan
If you’re a housewife with assets such as valuable jewelry, you might be able to use this as collateral with some lenders. Gold jewelry is the best choice for this personal loan since gold is a hedge against inflation. Of course, the asset’s value you’re using as collateral will most likely be similar to that of the loan, given the risks of default involved. You’ll also have to look for lenders who give this kind of loan as not all conventional lenders will provide such loans. With gold loans, the lender will first determine the quality of the gold because they only accept 18 or 24 karats of gold as collateral for this kind of loan. The quality of the gold will determine the interest rate and terms of the loan.
However, gold loans aren’t common in America as in India, where it’s part of the financial system. Here, the chance of getting a gold loan in the US is very slim, and only a few banks offer such loans, and most times, it’s smaller banks like Federal Bank or the First Republic. Like a fixed deposit loan, the chance of using a gold loan to get a house is slight.
Best way for a Housewife to get a home loan
The surest way for a housewife to get a home loan is through a joint application with their spouse or family member who has a stable and consistent source of income. Where there’s an employed guarantor or co-applicant, the chance of a housewife getting approval increases. However, the joint application comes with various conditions. The family member serving as a co-applicant must have a high credit score. It’s also a bit risky because any default on a loan will affect the credit score of both applicants. With a joint application, you won’t have full right over the property, which means you can’t sell by yourself, and default will affect the other party.
How To Improve Eligibility for Home Loan
Getting a home loan as a housewife is likely impossible. But if you’re considering applying, there are things you can do to improve your chance of becoming eligible for one. That include:
1. Have a Source of Income
As a housewife, the most important thing to get a home loan is to have a source of income. Thus, that should be a priority. It’s possible to get remote jobs that allow you to work from home while still earning consistently to show that you can afford to repay the loan. Once you have a source of income, the chances of getting a loan approval increase significantly.
2. Higher Down payment
Most lenders finance between 75 to 95% of the cost of the home, and it’s only in special government programs that you have 100% financing. One of the ways to improve your chance of getting a loan is to pay a higher down payment. This means the lender has less risk to bear, and the interest on the loan will also be lower over time. Of course, raising the required down payment isn’t easy either, and you may have to save for it for some years.
3. Clear Debts
Not having any debt on hand also improves your chance of getting a home loan. When evaluating you, the financial institution will look at your debt-to-income ratio, and any pending debt will influence your eligibility.
4. Improve Credit Score
Your credit score also matters because it says everything about your repayment history and risk of default. A good credit score doesn’t just increase your chance of getting a home loan. It also makes it easy to negotiate a better deal with the lender. If a lender sees that the risk of default is high, they’re more skeptical and want to compensate for such risks duly.
All it takes to get a home loan is to be eligible. But it might be difficult for someone who doesn’t have a source of income to meet these eligibility requirements. Home loans are a significant financial commitment due to the length of the loan and the amount. You can try to use secured personal loans to get a home loan, but the most likely choice is to use a joint application with a spouse or family member.