To address insufficient home loan eligibility, borrowers should first review and improve their credit score, as lenders prioritize applicants with scores above 620. Increasing the down payment reduces the loan-to-value ratio, enhancing approval chances. Exploring alternative loan programs like FHA or VA loans, which have lower credit and down payment requirements, is also critical. Additionally, reducing debt to lower the debt-to-income (DTI) ratio can help, as lenders prefer DTI below 43%.

These strategies are effective because credit scores directly influence loan approval rates. For instance, a FICO score below 580 often results in loan denials, while scores above 740 qualify for the best terms. Data from the Consumer Financial Protection Bureau (CFPB) shows that 30% of mortgage applicants were denied in 2022 due to poor credit or high DTI. Increasing the down payment also lowers borrowing costs and aligns with lender risk thresholds. For example, a 20% down payment reduces the loan amount, decreasing interest expenses and improving affordability. FHA loans, requiring just 3.5% down, helped 1.2 million homebuyers in 2021, per , by accommodating lower savings. Similarly, VA loans, which require no down payment, assisted 698,000 veterans in 2022, enabling homeownership despite financial constraints. Reducing DTI through debt repayment can boost eligibility, as 28% of applicants with DTI over 50% were denied in 2023, per mortgage software provider Black Knight. Combining these steps addresses multiple eligibility factors, increasing the likelihood of approval while minimizing long-term costs.