Factors That Can Affect Your Home Loan Eligibility

Some fail to buy a home by not meeting the eligibility criteria set by the lenders to take a home loan. Firstly, you need to have a regular income to pay the applicable EMIs on time. Besides, your age, property value and several other factors can also impact your home loan eligibility. For more information on this matter, read further.

How Do Banks Assess Your Home Loan Eligibility?

Your home loan eligibility will be evaluated based on the following factors –

Age

When you’re in your early 30s, you can get a long time to repay the loan. On the other hand, if you apply for a home loan at 50, you will be given a maximum of 10 years to repay the loan, assuming you would retire at 60. A much shorter tenure may keep the EMIs way high for you to pay comfortably, possibly resulting in application rejection.

Income

If you earn a handsome amount, it will be a plus point on your loan application. And this could help you borrow a home loan to buy a house. The income helps lenders assess your EMI payment capabilities as they don’t like to see any loan default from you later. Although banks can recover the lost money by seizing your property and selling it, the lack of sufficient income can break it for you. To check your income, lenders scrutinize your salary slips and bank statements thoroughly. Only when convinced of your income do the lenders move forward with your application and check other details.

Employment Status

Salaried individuals have a regular flow of income, but they also need to spend a fairly greater length of time in their organizations to be eligible for a home loan. Because if you have only spent one or two months, it means your job isn’t stable and there are chances of payment defaults. You should have spent at least 2 to 3 years in the current organization to borrow a home loan from a bank or NBFC. Although this criterion may vary from lender to lender. Because when you have a stable job, the lender will be assured that you won’t default on the payment. Even self-employed people receive a home loan based on business performance. However, the home loan interest rate for them will be higher than that of their salaried counterparts. The reason is the greater possibility of income disruptions in the case of self-employed borrowers.

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Property Value

It helps lenders decide the loan amount it can extend to you to buy a home. Home loans are financed at about 75-90% of the property value. So, a loan of up to INR 30 lakh is available at a maximum of 90% of the property value. As the loan amount ranges from INR 30-75 lakh, the financing limit reduces to a maximum of 80%. While loans above INR 75 lakh can be financed up to 75% of the property value. This is the dynamics of loan to property value that you need to understand.

Current Obligations

Your ongoing loans or credit cards help the lender know whether you are capable of borrowing a home loan or not. Because it can be too much debt for you. But you can overcome it if you have a high income or a co-borrower besides you. This way, you can increase your home loan eligibility.

Using the above factors, the home loan eligibility calculator generates the amount you can borrow for your home purchase. Take a look at the example below to understand this tool works –

Raj is a 28-year old salaried doctor who is looking to buy a house. And one of his friends told him to apply for a home loan. But before that, Raj checks the loan amount he is eligible for. For this, he uses the home loan eligibility calculator. He inserts the following details –

Net Monthly Income – INR 40,000
Chosen Repayment Period – 30 Years
Home Loan Interest Rate – 6.70% per annum
Other EMI – INR 1,500
So, as per the calculator, Raj will be eligible for an amount of INR 25,57,038 with an EMI of INR 16,500.

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Note – This is an approximate result – the actual values may differ.

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  • Home Loan Interest Rates October 2022
    Axis Bank7.60% - 8.05%
    Bank of Baroda7.45% - 8.80%
    Citibank6.65% - 7.40%
    HDFC8.10% - 9.10%
    ICICI Bank7.10% - 8.85%
    Indiabulls Housing Finance Limited8.65%
    Kotak Bank7.99% - 8.60%
    LIC Housing8.00% - 9.25%
    Piramal Capital & Housing Finance10.50%
    PNB Housing Finance8.00% - 10.70%
    Reliance Home Finance8.75% - 14.00%
    State Bank of India/SBI8.00% - 8.55%
    Tata Capital7.75%