The demand for home loans at present stands at an average rate of 28%, which is expected to rise to 40% by 2025. Understandably, this demand in home loans is going to impact the number of loan applications submitted in each financial year and the amount of loan approved. As of June 2019, the amount of housing loan sanctioned in India reached Rs. 11.8 Lakh Crore.
Consequently, candidates meeting the lender’s eligibility criteria can easily avail a home loan and purchase the property of his/her choice.
Since lending institutions are at a riskier end while extending finances, they make sure that loans are sanctioned to suitable applicants only who can repay it in time. One can make use of a housing loan eligibility calculator available online and verify if he/she is eligible to avail a loan.
Now, take a glance at factors affecting eligibility decisions made by financial institutions.
Factors that help lenders determine home loan eligibility:
Age of the candidate
Age is an important eligibility criterion as it helps lending institutions decide the tenor of home loans. So, individuals who are close to retirement age stand a bleak chance of enjoying long tenor loans. It is because financial institutions doubt their repayment capability in the absence of regular income source.
Lending corporations prefer extending finances to candidates who are in the range of 30-40 years of age. They are expected to have a stable income and sufficient service years left for loan repayment.
Monthly/annual income and debt to income ratio
Debt to income ratio is an essential consideration that lending institutions include in their home loan eligibility criteria. The monthly gross income of the loan applicant is evaluated along with the overall debt that they need to pay every month.
Financial corporations make sure that this ratio doesn’t cross a certain amount, which leaves an individual with sufficient finance to pay EMIs in time while enjoying financial stability.
The loan applicant’s credit score
A credit score is a financial report card of an individual that vouches for his/her repayment credibility. Financial agencies prefer lending credits to individuals who have a decent credit score of 750 and above.
The accompanying credit report also informs lenders about one’s credit history and repayment habits, and therefore, is among the crucial factors affecting home loan eligibility.
Loan to value
Lenders estimate your property value based on market rates, property location, age of the property, etc., and determine their loan to value ratio. It determines the amount that can be approved as a loan.
One can, at the most, borrow up to 80% of the property value as the loan amount. Therefore, a candidate is eligible for the applied loan amount only if it is within the lender’s loan to value range. Individuals can also check whether they meet other eligibility by utilizing a housing loan eligibility calculator.
Work stability & employer profile
An applicant’s work experience and stability in a particular job are looked into by financial corporations and are considered for eligibility. Most leading lenders do not lend finances to candidates who have less than two years of work experience.
Candidates are asked to provide documents required for home loans supporting their employment. Also, one should be working with the present employer for more than six months.
So, these are the primary home loan eligibility criteria for salaried individuals. Additionally, the employer profile is examined to confirm if they make stable and timely payments to employees or not. Lenders determine these eligibility conditions to minimize the risk involved with loan repayment.
Determination of home loan eligibility includes many factors for consideration. Hence, lending institutions measure these constraints to decide on the criteria. Candidates must fulfill these criteria to get their home loan sanctioned. Applicants can make use of a housing loan eligibility calculator and determine if they are eligible before submitting a loan application.