Individuals who are looking to purchase a residential property can consider availing a home loan to secure the necessary funding. However, because of high delinquency rates, lenders are setting strict eligibility parameters. As such, borrowers should gain a comprehensive idea regarding home loan eligibility as it will enable them to gain quick approval.
Given below are some of the factors that leave a significant impact on home loan criteria –
It is one of the main factors that leave a significant impact on home loan criteria as it determines the repayment capability of a borrower. Accordingly, applicants with a steady source of income can quickly get approved for a home loan.
Moreover, because of the high loan value, lending institutions set minimum income criteria based on borrower’s city of residence. For instance, some lending institutions require a minimum income of Rs.25,000 to be eligible for a home loan.
Another factor that impacts an applicant’s home loan criteria is his/her employment status. A borrower who is employed at a reputed MNC or a private or public organisation stands a higher chance of repaying the loan in time. Consequently, lenders consider them more eligible for a home loan.
The home loan amount also varies depending on the type of employment. For example, some financial institutions offer up to Rs.3.5 crore to salaried applicants and up to Rs.5 crore to self-employed individuals.
Age is another crucial factor that plays an important role. Home loans come with a prolonged repayment period of up to 20 years, which covers a significant portion of an individual’s professional life.
Therefore, individuals who are in the initial years of their career stand a better chance of repaying the home loan amount. Additionally, there are other advantages of taking a home loan in your 20s. For instance, they can be eligible for a higher loan amount.
Financial institutions also lay down a minimum age requirement under their home loan criteria. The age criteria for salaried applicants is 23 – 62 years, whereas for self-employed individuals is 25 – 70 years.
Value of property –
The current market value of the property against which the borrower is applying for a home loan also plays a significant role in home loan criteria and determines the loan amount. Hence, if the property value is high and is situated at a prime location, then borrowers will also be eligible for a high loan amount.
Debt-to-income ratio –
The percentage of an individual’s monthly income that goes towards the payment of their current obligation is referred to as the debt-to-income ratio. A borrower who has a low debt-to-income ratio has a higher chance of repaying the loan in time and is considered to be more eligible.
Credit score –
A home loan is a type of secured advance which is availed against collateral. Hence, if a borrower fails to pay the loan amount, the lender can take recourse of such loan recovery in the property. Thus, the CIBIL score is not essential to avail a home loan. However, borrowers should still know the CIBIL score for a home loan and try to maintain a positive credit score as it will increase their eligibility for the advance.
Individuals with a low credit score can implement the following measures to increase the same –
- Opting for a healthy mix of secured and unsecured credits.
- Regulating their credit utilisation ratio to 30% of the overall credit limit.
- Making sure to pay all bills and loan EMIs in time.
Additionally, borrowers should bear in mind that only individuals who are resident citizens of India can apply for a home loan.
Some lenders also facilitate smooth and hassle-free loan processing with their pre-approved offers. Besides that, these offers can also be availed on a variety of financial products like loans against property. One can quickly check his/her pre-approved offer by entering only a few details like their name and contact information.
Borrowers can use online tools like home loan eligibility calculator to determine the loan amount that they are eligible to avail. They can enter the following values to compute the final loan amount –
- City of residence.
- Monthly income amount.
- Loan tenure.
- Value of additional income, if any.
- Total current debts.
Individuals who are planning to opt for a home loan can adopt specific steps to improve their home loan criteria for eligibility.
For instance, they can apply for a home loan with a family member who has a positive repayment history and healthy CIBIL score to avail quick approval on a home loan. Borrowers should also furnish the correct home loan documents during application to improve their eligibility for a home loan.