Buying a home, whether for investment or residential purposes, can take years to materialize, and given the prices, few can afford to pay such a whopping amount. You also have to factor in other aspects of buying a house, such as getting a Chartered Surveyor or the bidding process which are both necessities that add more time and sometimes money to the experience. In such situations, buyers inevitably turn to banks for home loans.
However, taking a housing loan is not an easy task. It is dependent on several factors and thus, before applying for a home loan, keep all the important factors in mind to check your home loan eligibility and to get easy approval of the loan at nominal interest rates.
Factors that Determine Your Eligibility for a Home Loan
The early you apply for a home loan, the more is the possibility of a bigger amount getting sanctioned to you by the bank compared to taking a loan in the late 40s or 50s when you may find it difficult to avail a loan of a higher amount as repayment of the loan will get affected once you get retired. So, it’s advisable to take a loan at an early age to avoid defaulting on payments.
2. Qualification and experience
If your academic credentials and work experience are impressive, the banks may sanction a higher amount of loan. To be eligible for a home loan, a salaried employee must have at least two to three years of work experience. Similarly, if you are a self-employed individual, your company must have been operational for a couple of years, with sufficient cash profits and revenues. Your qualification and work experience predict stability and progress fairly well.
3. Credit score
A healthy credit score of 650 and above can directly impact the home loan interest rates offered to you. Your score takes into consideration factors such as your repayment history, how many existing loans and credit card dues you have, and what kind of debt you have borrowed in the past. Thus, a lender can use a credit score to assess your repayment capacity before approving the loan.
Needless to say, having a stable income is a necessity if you want to get your loan approved. The higher your income, the greater the number of money banks are willing to lend you. All lenders insist that applicants should have a certain level of income to be eligible for a home loan. This, of course, varies according to your profession. Thus, your income plays an important role in determining your home loan eligibility.
5. Existing debt obligations
If you have too many loans running, the probability of the bank sanctioning your home loan will be lower. Similarly, if you have too many unsecured loans running, the risk of granting a secured loan such as a home loan is too high for banks and financial institutions. Also, lenders pay special attention to your repayment pattern. Missing EMIs regularly, or making EMI payments after the due date is a cause of concern for them. So, be disciplined with your repayments to get a high amount sanction on flexible terms and a nominal interest rate.
6. Property age
If your property is worth more, you will get a higher loan amount and vice versa. So, choose the right property that has the potential to increase in value in order to secure substantial funds. Avoid choosing older property if possible. The lenders may also consider the existing properties or assets that you may have.
Also Read: 5 Types of Home Loans You Need to Know
So, before applying for a housing loan, keep these important factors in mind to determine your eligibility and to get easy approval of loans. You can also use a home loan eligibility calculator through various online aggregators to check your eligibility.