- How can you get the approval for a home loan from lenders in India?
- Know about all the factors that can increase your chances to get a home loan approval from lenders
A lot of individuals don’t own a home in India. The primary reason behind this is the soaring real estate prices. With limited savings and monthly income at their disposal, they simply cannot afford to pay the price of a home in one installment. To make this possible, banks, financial institutions and housing finance companies provide a home loan facility to such individuals. With this facility, they can purchase the home they want with the loan amount and repay it in monthly installments. But there is a small thing that individuals need to ensure before getting the home loan – First, they need to get approval for a home loan from the lender.
So how do individuals get approved for a home loan? The answer would be meeting the eligibility criteria fixed by the particular lender which includes several factors. A lender checks these factors thoroughly before approving a borrower a home loan and sanctioning the required loan amount. So what are these factors that can get a home loan approval? This article will provide all the answers related to this question. So, keep reading to know more about it!
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Factors that Affect Home Loan Approval
When we talk about eligibility, there are a few factors that determine whether your home loan will be approved or not. These are your monthly income, property location, property value, your qualification, your employment type, your existing loans, credit score, etc. So, to know how to get a home loan approval, it is important to know about these factors that we will tell you in detail one after another. And this will help you in knowing the overall process of getting a home loan approval. So, let’s start.
Close your Existing Loans
When you opt for a home loan for a definite amount for a fixed tenure, the first thing a lender checks if you will be able to repay the loan amount or not. One of the ways to have an estimate about your repayment capacity is by checking how much income you can save after setting the basic spendings apart. For example, if your monthly income is INR 50,000 and you spend around INR 15,000 in a month on various expenses. So, the remaining INR 35,000 is your repayment capacity with which you can pay off your home loan.
But if you have already been paying debt (credit card, personal loan, car loan, etc.) from your monthly income then your repayment capacity will naturally be lower as compared to no existing obligations. So, the chances of getting approved for a home loan are higher if you have no existing loans or credit card debt. It would be better for you to pay off all your loans and credit card dues before opting for a home loan. Closing all your existing loans will also help you in getting a higher loan amount because of the higher repayment capacity.
Employment Type and History
Your employment type, its reputation and the number of years (job history) since you are working also plays an important role in getting your home loan approved. As you know that a home loan can be taken by both salaried and self-employed individuals. Let’s talk about salaried individuals first. Suppose there are two applicants who want to opt for a home loan. One has been working in a reputed multinational company (MNC) for the last four years and the other has been working in a non-listed private company for the last year. Based on this condition, a lender would like to provide a loan to the former applicant because of his employment type.
The second applicant would also be able to get the loan but the lender might provide him the loan amount at much higher interest rates or the loan amount would be lower than his requirement. That’s why the probability of getting approved for a home loan is much higher when you are working in a reputed company for a certain period. A lender checks all the details related to your profession (company’s type, reputation, job history) to make sure you will be able to repay the home loan.
When we talk about the self-employed individuals, a lender checks a few things about your business such as what kind of business you are operating, the balance sheet of past few years, how does it function in different times of a year, how much stock (related to the business) you generally have all the time, etc. After thoroughly checking these things, the lender approves your home loan. So, if you are a self-employed individual who is looking for a loan, you must keep these things in mind to get a home loan approval from a lender.
This is one of the factors influencing a home loan approval that most of the individuals don’t have an idea about – Qualification of the Applicant applying for a home loan. When an individual applies for a home loan, the lender checks all the things related to his or her qualification. This also helps lenders in getting an idea about the eligibility of an individual.
A high-qualified individual having an excellent background in education all-around has higher chances of getting his home loan approved as compared to an individual who hasn’t even passed his high school examination. So, before giving an applicant a nod for the loan approval, the lender likes to check the educational background of an applicant. If you are someone who does not have a satisfactory educational qualification, you can do one thing to increase your chances to get approved for a home loan. You can opt for a co-applicant who has got a higher education background. With this, you can get the home loan or you may opt for the home loan without having a co-applicant but you may get higher interest rates than usual.
Property Location and Value
Home loans are taken by individuals to purchase the property they want. Hence, the most important factor that can help get an approval for a home loan is the property itself. Before giving you approval, every lender checks different aspects related to your property, such as its location, overall value, builder’s reputation, nearby amenities, etc. The lender will put all these factors under the scanner and then decide on your loan approval.
The location of your property plays a huge role in determining the chances of your loan approval. A lender is more likely to provide the home loan for a property that is situated at a prime location than for a property located at a remote location, someplace far from the city with no amenities nearby. So, while looking for the property for which you want a home loan, you should keep this fact in mind that your property must be at a good location. There are some lenders who do not provide home loans at certain locations, so you should check the list of those locations beforehand if you want a home loan from a particular lender.
Apart from this, the lender will also check the profile of your builder, its reputation and past projects completed by the builder. And if a lender will find it satisfactory, you will get the approval for a home loan.
Making Higher Down Payment
As you know the home loan amount generally ranges from 75% to 90% of the overall property value. To get a home loan sanction, you will need to provide the remaining amount from your own sources. This amount is known as the Down Payment Amount. Let’s understand this via an example. Suppose the overall property value is INR 30 lakh. So, based on this amount, you can get the maximum loan amount of INR 27 lakh. You will need to fund the remaining amount of INR 3 lakh by yourself. This amount is known as the Down Payment Amount.
So, if you want to increase your chances of getting approved for a home loan, you can pay a higher down payment amount. Higher the down payment you make initially, the lesser loan amount you will need to take. This will help you in reducing the unnecessary burden of a bigger home loan amount. Apart from this, since you will need a lower loan amount, the lender will happily provide the loan amount. Due to the lower loan amount, you may also get lower interest rates. So, this is also an amazing method to increase your chances of getting approved for a home loan.