Factors that affect home loan eligibility

Have you applied for a home loan, or do you intend to apply for one in the future? When purchasing a house, the vast majority of young Indians apply for a home loan. Home loans are sanctioned by Banks and financial organizations subject to the fulfillment of specific terms and conditions. 

Lenders assess home loan applications in accordance with very strict guidelines. Aside from the criteria that banks and financial institutions use to assess your application, there are a number of other variables that may affect your chances of obtaining a house loan.

• Age

It is anticipated that you will be eligible for a house loan for a certain length of time termed “tenure.” Your tenure is determined by your age as well as your capacity to pay it off within a certain period of time. Young applicants will have different repayment capabilities than middle-aged or elderly borrowers, as will their capacity to repay their loans. Home loan borrowers at various stages of their life confront various difficulties that are quite distinct from one another.

• Qualifications and previous work experience

If your academic qualifications and job experience are outstanding, your chances of getting a house loan from a bank are significantly increased. Taking the example of a paid job, you must have between two and three years of work experience in order to qualify for a house loan. 

A self-employed person must have had his or her business in operation for at least two years and generated sufficient cash earnings and revenues to qualify. Tax returns must have been submitted in the name of the corporation as well. Your academic qualifications and job experience are pretty accurate predictors of career advancement and stability.

• Income

The amount of money that banks and financial organizations are prepared to lend you is strongly influenced by your income. If your salary is more than average, the quantity of money that banks are prepared to give you will also be higher. All lenders need applicants to have a specific amount of income in order to be considered for a house loan, regardless of the lender. Of course, this varies depending on your field of expertise as well as the benefits and assurances offered by your employer.

• Dependents

The number of dependents you have will have an effect on your ability to qualify for a mortgage loan. Even when all other factors are similar, if you have a large number of dependents, your chances of getting a house loan are lower than otherwise. On the contrary, your salary should be sufficient to sustain yourself and your dependents while also shouldering the added responsibility of debt repayment on your house.

• The Nature of one’s job 

The nature of your job will have an effect on your ability to qualify for a house loan. Banks are concerned with whether you are salaried, whether you are a Self-Employed Professional (SEP), or if you are a Self-Employed Non-Professional (SELNP) (SENP). The qualifying requirements differ depending on your place of work. Job changes on a regular basis may have an adverse effect on your ability to get a house loan.

• History of credit and payments 

Your credit and payment history provides the lender with an understanding of how you have dealt with your obligations in the past, as well as an indication of your ability to repay the loan. A credit score is given to you based on the information included in your credit history. Your credit score is used by banks to determine whether or not to approve your house loan. 

Your credit score provides information to your lender about the kind of borrower you are likely to be. Even if your credit score is less than perfect, you do not need to be concerned. Although your credit score is essential, it is not the only factor considered by banks when evaluating your house loan application.

• Cash deposited as a down payment or as margin money

When it comes to your EMI, you shouldn’t only be concerned with the principle and interest components of the payment. You will also need to arrange for the cash to be used as margin money on your house loan. This is referred to as the Loan-to-Worth Ratio, and it refers to how much of the property’s market value the lender is willing to finance (90 percent in case of home loans below Rs 30 lakhs). The borrower is responsible for arranging the 20 percent (or 10 percent, depending on the situation) of the property’s market value. The amount of money you have available for a down payment will have a significant effect on your home loan eligibility.

• Interest rates in the open market

It has a significant effect on your debt and advances how the Reserve Bank of India (RBI) policies and market lending/interest rates are interpreted. The cost of borrowing money is determined by the rate of interest charged. The cost of your home loan will increase in direct proportion to the interest rate.

Not to mention private banks and financial organizations set their own interest rates depending on the market trend. Some private financial institutes are able to adjust the interest rates, offering custom rates for better or worse based on the customer’s financial history. 

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.