10 October, 2018 Home Loans
To avail a home loan, you must be eligible for a loan. The financial institution offering the loan often sets a loan eligibility limit based on the applicant’s financial standing.
A home is a special and a prized possession that every individual aspires for. Investing in a house gives a great sense of financial security and accomplishment to all of us. The availability of home loans has been a massive boon for everyone who has been aspiring to own a house of their own.
To avail these loans, you must be eligible for a loan. The financial institution offering the loan often sets a loan eligibility limit based on the applicant’s financial standing. In case of salaried professionals, a pre-defined formula is used along with a few other criteria to arrive at a limit, up to which home loan can be offered to that person. These criteria help the lending institute to gauge the financial stability of the person and considers the capacity of the applicant to repay the loan before setting a limit. We have listed down these factors that are crucial in calculating your home loan eligibility.
1. Income of the applicant
Your monthly income determines the home loan value you can borrow. The odds of you defaulting the home loan is lower if your salary package is on the higher side. Also, you can avail a bigger amount of loan if your income is on the higher side. For financiers, logic is simply that with higher income borrowers, higher monthly EMI’s can be paid and hence the applicant is eligible for a higher loan amount. For example, a person with a monthly salary of 1 lac has higher possibilities of affording an EMI of Rs 30,000, compared to a person earning Rs 70,000.
Self-employed, or business owners are less preferred as compared to salaried professionals, as the income of salaried individuals is believed to be more stable and predictable. Thus, it is easier for a salaried person to avail a home loan. However, banks and financial organisations require salary slips, IT returns and bank statements of the last 3-6 months. This allows financiers to gauge the income and spending patterns to validate the stability of income and savings.
The home loan eligibility is considerably affected by the age of the borrower as the tenure of your home loan depends on the applicant’s ability to pay and his/her tenure. For eg., A younger salaried individual in his early 30’s is expected to have a job for the next 30 years and can pay off the loan amount without many issues. However, an individual in his 40’ 50’s will not have a steady income for long and hence might not be able to pay his debts seamlessly. Thus, a younger applicant is eligible for a higher loan amount compared to an older housing loan applicant.
3. CIBIL score and Credit rating
The credit and payment history of any applicant can impact the home loan eligibility directly. The credit scored is given based on your payment history, your behaviour in paying loans which includes credit card payments, car loans and personal loans. Banks decide whether to sanction your home loan based on your credit rating or CIBIL score. A borrower with a bad history of repayment of debts may not be given a home loan. There is another misconception that if a person has never taken a home loan or credit card he/she will easily get a home loan. The absence of a cibil score will make it even more difficult to get a home loan as lenders don’t know whether you are a responsible borrower or not.
4. Type of Job
Availing a Home loan for salaried professionals is easier than self-employed professionals. Stable jobs such as bankers, doctors, engineers, software professionals are well-paying jobs and come with security. On the other hand, realty estate agents, insurance agents, BPO job holders are considered risky and hence have a lesser chance of availability of home loan. Frequent changes in your job profile can also affect your chances of getting a loan.
Apart from the above, there are other factors like employer’s reputation, the rapport you share with the lender organization/bank and the age and type of the property you are investing etc. While the weightage of these ancillary factors may vary, these factors also help a person to calculate a fair estimation of an applicant’s loan repayment capacity. Further, you can simply click on to home loan eligibility calculators available online which will consider your home loan tenure and home loan interest to arrive at a figure.