Home Loans are credit facilities finance companies provide to individuals planning to buy, build or renovate a property. Applicants can obtain a loan of up to 90% of the property’s cost, which they must repay in EMIs over a repayment term of up to 30 years. Current interest rates are around 8.50% per annum for both salaried and self-employed individuals.
Since Home Loans involve large amounts and have long payback terms, loan providers have tight eligibility conditions to sanction the desired funds. A Home Loan eligibility calculator helps calculate the loan amount a loan seeker can borrow. Still, lenders consider various factors while assessing Home Loan applications. Let’s look at a few.
Housing finance companies often prefer borrowers who can repay their loans satisfactorily before retirement. That is why most lenders have a maximum age limit of 60 years before the loan term ends. However, some companies also offer lenient age limits extending to 70 years. Therefore, age is an important factor in determining an applicant’s loan eligibility amount and tenure.
Another factor that loan providers consider is the applicant’s average monthly salary. Since these loans involve large sanction amounts, lenders want to ensure that their borrowers have decent incomes from their jobs and other income sources. That is why most lending institutions ask for Home Loan required documents to verify the applicant’s income.
Sufficient income allows borrowers to pay the monthly EMIs consistently, reducing the chance of missed payments or defaults. However, those with limited income must look for housing loan companies with low minimum-salary requirements. Although a greater salary improves the chances of loan approval, low salary requirement makes housing loans accessible to most.
3. Credit History
The applicant’s credit score and report are essential to determine home loan eligibility. India’s central bank, the Reserve Bank of India, has authorised four credit bureaus to issue individual credit ratings. They work with credit companies to record each credit-related transaction taking place in the country. They receive monthly reports on each individual’s credit transactions from these companies containing details about their credit card and EMI payments, due balances, credit usage, etc.
The credit score measures the applicant’s credit behaviour that lending institutions use to determine their creditworthiness. A credit score of 611 and above is favourable enough to attract a Home Loan approval. Those with strong repayment records have high credit scores, which help them obtain high loan amounts at reasonable interest rates. Overusing credit or skipping payments can hurt the credit score and decrease their loan eligibility.
4. Work Experience
Someone with a history of frequent job changes may not qualify for a housing loan because they might not maintain a steady income during the loan tenure, putting them at a higher risk of missing EMI payments. Building a work experience of at least three years is a good idea before applying for a Home Loan. Remember, applicants must provide relevant home Loan required documents to support their details of work experience.
5. Employer and Employment
Loan providers also consider the applicant’s employment during the loan approval process. Since Home Loans involve large monthly EMIs, lenders need a guarantee that they have stable monthly incomes during the loan tenure, allowing them to make payments on time. That is why they want to confirm the applicant’s job position. They expect their borrowers to have consistent employment with the same company for extended periods.
Home Loan is one of the biggest financial obligations in a person’s life. Therefore, aspiring borrowers must research, use a Home Loan eligibility calculator, and evaluate Home Loan plans from different lenders to make their purchase after thorough consideration and planning. Overlooking a single factor might result in loan rejection and financial distress.
Also Read : Get Updated With Housing Loan Procedure