- Worrying whether you can get a home loan without any credit history?
- Stop worrying! Home loans can be approved but at a slightly higher interest rate compared to someone with a good credit history
A credit history showing a flawless repayment track is vital to get a loan from lenders. A good repayment track makes a lender confident of your ability to pay dues on time. But when it comes to getting a Home Loan, the importance of credit history reduces to an extent. The reason being a home loan is a secured loan granted against an equitable mortgage of the property you wish to buy. In case you default for 6-7 months in a row, the lender can seize the property and auction it in the market to recover the money lent to you. So, even if you don’t have a credit history, you can get a home loan from several banks and housing finance companies (HFCs). Read this post further to know the factors on which your home loan approval depends.
Things That Lenders Consider Before Approving a Home Loan
Assuming you don’t have a credit history, your home loan eligibility will be assessed on your income, age, as well as the property you are looking to buy.
Income is the first thing that a lender checks to assess the repayment potential of an applicant. A greater income gives borrowers more scope for repaying a home loan compared to someone with less income. The quantum of income will help decide the loan that the lender will disburse to the borrower. However, the maximum quantum is subject to the Loan to Value (LTV) ratio as set by the lender. Normally, loans upto INR 30 lakh, above INR 30 lakh-75 lakh and above INR 75 lakh are disbursed at upto 90%, 80% and 75% of the property cost, respectively.
The age of the applicant is also factored in by the lender while approving a home loan or deciding the loan amount. The younger you are more are the chances of home loan approval and greater loan disbursals compared to when you are nearing retirement. The reason being the job prospects are more when you are young.
If your income is not sufficient to get a loan amount that is required to buy a home from its seller, adding earning co-applicants can help!. The co-applicant can be your immediate family members. But the maximum loan quantum will be limited to the LTV ratio, which is mentioned above.
Both salaried and self-employed are eligible to apply for a home loan. Lenders would like you to have some years of work experience before giving you a loan.
The Kind of Property You’re Looking to Buy
You can either buy an under-construction property or a ready-to-move unit with a home loan. The loan for an under-construction property will come in phases, and till the time the construction is not completed, the interest applicable for the period will be deducted through equated monthly installments (EMIs). Whereas, the loan for a ready-to-move property will come in one bunch and the EMI applicable for it includes the principal as well as interest.
The Location of the Property
It is also one of the important factors that lenders consider before approving a home loan. If the property is located in a low-profile area, not many lenders will give you a loan. So, for the loan application to be approved without any problem, the property should be located in a good area filled with amenities.
The Reputation of the Property Developer
It also depends on the property developer with whom you are transacting. For a hassle-free home loan disbursal, the property developer must be a recognized one and have been approved by the concerned lender.
What is the Interest Rate on Home Loans Given to Individuals with No Credit History?
A credit score may not hold much importance when it comes to accessing home loans, but it is important as far as interest rates are concerned. The rates for individuals with no credit history will be higher than the ones having a good CIBIL score, but lower than those having a bad score. Although most lenders don’t disclose the rate of interest for those not having a credit history, there are Bank of Baroda (BoB) and Bank of India (BOI) that reveal the same. BoB gives a home loan to individuals with no credit history at an interest rate of 7.10% per annum. On the other hand, BOI have different interest rates based on their profession. Salaried borrowers can get a home loan at 7.00% (women applicants) and 7.05% (other applicants). Whereas, self-employed can get the loan at 7.10% (women applicants) and 7.15% (other applicants).
What If You’ve a Credit History and it is Good?
It was hinted above that people with a credit history are rewarded with attractive interest rates. You can now get to see the special rate for people with a good credit score. Let’s check out the table below to know the same.
|Lenders||Credit Score||Special Interest Rate (In Per Annum)|
|HDFC Limited||780 and Above||7.35%|
|LIC Housing Finance (LIC HFL)||800 and Above||7.50%|
|Bank of Baroda||726 and Above||6.85%|
|Bank of India||760 and Above||6.85%|
|Punjab National Bank (PNB)||750 and Above||7.00%|
|PNB Housing Finance (PNBHFL)||800 and Above||8.60% (Salaried)|