A large percentage of aspiring homeowners look for a home loan to purchase their dream house. However, before proceeding with all the nitty-gritty, it’s crucial to check home loan eligibility to apply for a home loan. According to most lenders’ eligibility requirements, a home loan applicant must be an Indian citizen, within their set age limit, and have a strong credit history. Depending on the financial institution’s policy, the applicants must also submit a few necessary documents.
To find more about getting a housing loan, let’s first look at the factors that influence an applicant’s eligibility for a home loan.
Lenders estimate an applicant’s loan eligibility for a certain period called the loan tenure. The tenure for which an applicant can borrow depends on their age and ability to repay during that period. For instance, a young applicant’s repayment capacity differs from a middle-aged or retired individual.
Borrowers face different challenges during different phases of their lives. Lenders consider these factors while scanning home loan applications. By budgeting and planning well, an applicant can overcome the obstacles in their age group and find a solution available to them.
Income is one of the essential factors determining an applicant’s eligibility when they proceed with the home loan apply online procedure. Its importance for loan eligibility and approval needs no explanation. The applicant’s income significantly affects the loan amount lenders are willing to lend them. All financial institutions insist that an applicant earn a minimum amount to qualify for a home loan. Of course, an individual’s income varies greatly depending on their profession, and lenders calculate an applicant’s eligibility based on this vital factor.
An applicant’s employment status is as crucial as their income. Working in a reputed private or public sector organisation or MNC makes an individual more credible as a borrower. Self-employed professionals are also eligible for a home loan rather than someone with a new or unstable business or job. The nature of employment also matters for the lenders. The eligibility will largely depend on whether the applicant is a self-employed professional, self-employed non-professional, or a salaried employee.
4. Experience and Qualifications
Applicants with impressive academic qualifications and sufficient work experience have higher home loan eligibility and greater chances of approval. For instance, salaried employees with 2-3 years of work experience in the same company have higher credibility than those who frequently keep changing jobs. Self-employed professionals who are operational in the same field for a few years predict income stability and progress, making them more eligible for a home loan. However, the lender will also check the applicant’s revenues, profits, and tax returns to verify their income.
5. Credit Rating
Lenders check an individual’s credit score to see how they have handled liabilities in the past and how capable they are of repaying their home loan. Since lenders largely depend on an applicant’s credit history to determine their loan amount and interest rates, it is crucial to maintain a healthy credit rating of 700 or above. Unfortunately, those with a low credit score and high DTI ratio have high chances of getting their loan rejected.
6. Down Payment
While applying for a home loan, the applicant needs to worry about the principal amount, the interest rate, and the down payment. It is a specific percentage of the property’s cost applicants must pay from their savings to initiate the loan process. Remember, lenders pay 70-90% of the property’s cost as a loan, and the borrower pays the remaining amount as a down payment. An individual’s down payment has an enormous impact on their home loan eligibility.
7. Market Lending Rate
The market lending rate, according to the RBI policies, influences loan eligibility significantly. The higher the interest rate, the harder will be the repayment. Consequently, the lender will sanction a lower loan amount according to the applicant’s repayment capacity. That is why borrowing becomes more attractive when the market lending rate decreases.
The parameters affecting loan eligibility vary between lenders. So, the applicants must visit their selected lender’s websites and use their home loan eligibility calculators to know how much they are eligible to borrow. Maintaining a high credit score and minimising financial obligations are effective ways to boost eligibility and borrow the maximum.