Are you planning to apply for a home loan? Have you checked your eligibility yet? Checking your eligibility before applying for a home loan is a crucial process that most loanees tend to ignore. It not only saves you from rejection but also ensures a smooth application.
While the eligibility criteria differ from bank and bank, some factors are common to all financial institutions. The most basic criterion is being an Indian citizen of age 21 and above. Read on to learn about other factors that affect housing loan eligibility in India.
Factors that Determine Your Home Loan Eligibility
Your credit score is crucial in your home loan application approval or rejection.
Lenders consider a score of 611 and above a good score. Such a score depicts your creditworthiness and helps instill confidence in the lender that you will be able to pay back on time.
It also increases your chance of getting favorable interest rates, EMIs, and tenures on the home loan.
However, this is not to say that individuals with lower scores do not stand a chance. They might still be approved for a home loan but may not get the best home loan deals in India.
So keep a tab on your credit score before applying for a home loan. If you find the score on the lower side, take steps to bring it up to the mark first.
Each lender sets out the minimum income criteria for a home loan up to a certain amount. The income criteria depend on your place of residence.
For instance, the salary requirements in big cities like Delhi, Gurgaon, or Bangalore are higher because of their higher cost of living.
As a rule of thumb, your EMI must not exceed 40% of your monthly income. But having a higher income further improves your chance of getting approved faster.
So remember to disclose your primary and secondary income sources on your loan application.
Not just the income but also the source of the income is also important.
Salaried applicants with stable employment records make better candidates than self-employed individuals with unstable incomes. Even among the salaried, a job with a renowned multi-national company or a reputed public or private sector company scores high on the ranking parameters.
So try to gain at least 3 years of work experience in an organization before you apply for a home loan. It will assure lenders of your consistency and ability to repay loans without default.
While anyone between 21 to 60 years of age can apply for a home loan, younger applications usually get an advantage. This is because banks seek candidates who can fulfill their loan commitments well before retirement.
So applying for a home loan at an early age can get you quick sanction on the best home loan in India.
Type of Property
Your property is the security for lenders based on which they are willing to loan you. So naturally, they pay a lot of consideration to it.
A new property in a good locality has the potential to increase in value and can fetch you a higher amount of loan. However, the same cannot be said for old properties. Lenders will likely do an individual appraisal in such cases and lend you a portion of the purchase price as they deem fit.
Further, lenders also consider the amount the downpayment you are willing to make. If you can make an upfront payment of at least 20% of the purchase price, it will enhance your housing loan eligibility.
Existing Debt Obligations
Multiple loans will not affect your eligibility as much as missing your EMIs. Lenders will notice a pattern if you are regularly late with your EMIs, which may adversely impact your home loan eligibility.
So make sure to pay your bills on time and settle all outstanding dues before you apply for a new home loan.
So these are some of the critical factors that affect your home loan eligibility. Make sure you fulfill these criteria before signing the loan application. Further, if you’re concerned about the affordability of your home loan, you can figure out the same using the online EMI calculator.