Buying a home is a necessity for most people, but it also makes a significant impact on your finances too. Due to this, you would need to avail of a home loan to manage funds for buying your house. Several factors impact your chances of getting your home loan approved while checking your home Loan eligibility.
The factors below are the factors that you should take care of to get a successful loan approval:
Banks always look at your credit history to decide whether they can grant you the loan or not. A credit score is a three-digit number that represents your past creditworthiness of the loans that you might have taken before. This means that your credit history will reflect your timeliness regarding the repayment of your previous loans. Good credit history will ensure the bank that you are a trusted borrower.
Factors affecting your credit history could be applying for too much credit, a large number of unsecured loans like credit cards, personal loans, or unpaid utility bills. It is also advisable to repay all your outstanding loans six months before you apply for a home loan.
The tenure of your home loan depends on your perceived ability to pay it off, which is decided by your age. The longer the earning period you have left, the more likely you are to get your loan approved. The tenure of the loan may go up to your retirement age. This means that a 40-year-old would get a loan tenure of 20 years. Banks generally prefer applicants between the age group of 30-40 years, leaning more towards the early 30s, because they are more financially stable. People in their 60s have the least chance of approval, although some banks can make their upper limit till 65 years of age.
Banks evaluate your professional background, and they are generally very traditional about it. This means that people coming from the government background, banking, or corporate sectors have more chances of being granted the loan. Sometimes benefits like higher loans are given to employees from certain companies, based on a step-up scheme, where the EMI increases annually for 3-5 years.
It would be difficult to prove your loan eligibility if you are self-employed, freelancer, working in media, lawyer or working in the police department, or self-employed. The time you have worked for your employer also matters a lot. The longer you have worked for the same employer, the more chances you have of your loan getting approved.
Your EMI (Equated Monthly Installments) to NMI (Net Monthly Income) ratio matters a lot in the application of your loan. Your NMI is the salary that you get after all your monthly deductions. It also impresses banks that you have enough money left after paying your EMIs. It relieves them of your chances of defaulting on your EMI payments. Another major factor is your stability. Therefore, if your salary slips prove that you have been getting regular increments, you have more chances of getting approved.
Evaluation of your Property
Before granting a loan, the bank evaluates your property in terms of its market value and checks if it is free from any disputes. Besides this, it also checks if No Objection Certificate(NOC) has been obtained by the builder from the government, completion certificates, locality of the property.
If the property is old, it can also stand in your way because the bank also assesses the structural damage and the risk of collapsing.
Banks also inquire about your current loans because they want to know if you will be able to carry out the repayment after paying EMIs for your existing loans.
Banks want to know about your marital status because if your spouse is working, you can quickly paying off the loan. While evaluating your application, they would take into account both you and your spouse’s income.
Amount of Down payment
It may not directly affect your eligibility for a home loan, but it can affect your EMI amount. The more down payment you would have paid, the lesser EMI you would have to pay.
Applying for a home loan is a little complicated process. But if you take care of these things, it would increase your chances of getting approved.