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5 Factors that affect your Home Loan Eligibility

5 Factors that affect your Home Loan Eligibility
 

5 Factors that affect your Home Loan Eligibility

Lenders lay down certain home loan eligibility criteria to determine whether they should sanction loans to potential borrowers. This is because home loan is high-value loan that pose a high risk for lenders, especially if the borrower defaults on repaying the loan EMI. There are several factors, within the control of the borrower that can affect their loan eligibility. But the 5 main factors are highlighted below.

Here are the 5 factors that affect your home loan eligibility:

5 Factors that affect your Home Loan Eligibility

1. Your age at the time of the loan application

Your age at is one of the most crucial factors that can affect your home loan eligibility. Lenders are generally more comfortable providing loans to younger applicants since they have several years of employment ahead of them. When you are stably employed, you receive a regular monthly income which enables you to repay the loan EMIs on a timely basis, without defaulting. In such a case, the lender also provides longer loan repayment tenures. Typically, lenders prefer to sanction loans to applicants over the age of 25 years, up to 45 years. Applicants above the age of 45 or 50 years are also eligible for the loan, but may be provided with shorter loan repayment tenures, lasting up to their retirement age.

2. Your monthly income, profession and employment status

Another crucial home loan eligibility criteria considered by lenders is the applicant's monthly income, profession, and employment status. Most lenders require you to have a minimum net (in-hand) monthly income of ₹25,000 to consider your loan application. They generally avoid sanctioning loans of applicants who aren't employed with traditional industries or companies that don't follow proper corporate structures. This is because unconventional jobs are considered risky, in which the lender cannot predict if the applicant will be continuously employed. As such, lenders prefer applicants who are employed for a minimum period of three consecutive years (preferably with the same organisation) or those who have their own, profitable business practice – doctors, lawyers, CA's, for instance. Also, salaried employees who keep changing jobs frequently may not be considered eligible for the loan.

3. The age of the property you intend to purchase

Your house loan eligibility also depends on the age of the property you intend to purchase. It is recommended that you avoid purchasing an older property. Lenders carry out their own independent evaluation to factor the risks associated with providing home loans for older properties. Since, there are greater risks associated with such properties for instance, they could be depleted or may collapse any time; your loan could be rejected. On the other hand, if you intend to purchase an under-construction or a new ready-to-move-in property constructed by a reputed builder, the chances of your loan being passed can improve tremendously.

4. Your credit scores

One of the most instrumental factors that help lenders determine your eligibility for home loan is your credit score. Your credit score is basically a numeric, three digit score that gives lenders a glimpse into your credit repayment behaviour. Lenders can evaluate if you have any existing debts/loans and whether you have defaulted on repaying any debts/loans in the past. They can also assess how often you use your credit card and whether you are repaying your credit card debt on time. Moreover, they can assess your credit utilisation ratio from your credit scores. Loan applicants with CUR of less than 30% of the credit limit have higher chances of getting their loan approved. Ideally, you need a credit score of approximately 750 out of a possible 900 credit points.

5. The number of dependants you have

Lenders need to consider the number of dependents you have while considering your home loan eligibility. This is because your repayment capacity is judged by the number of dependents. The higher the number of dependents, the higher could be your monthly expenses. If you are financially responsible for your retired parents, spouse and/or children your eligibility can be affected if your income is low but dependents are more.

You must check home loan eligibility and take steps to improve your eligibility before you apply for the loan, in order to receive the loan sanction on your first try.

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