A home loan proves to be very helpful in affording a dream home. However, there is a whole process that lenders have in place for applicants looking to apply for housing loan plans. This is why it is so important to be aware of the home loan eligibility criteria, which can differ from lender to lender.
5 common factors that lenders take into account while determining an applicant’s home loan eligibility:
- Income
The income of an applicant will have a major influence on the number of financial lenders agreeing to offer them a home loan. If your income is high, lenders will agree to offer a higher loan amount too. Every lender will have a minimum income criterion set below which they might reject loan applications.
- Age
Loan eligibility is also based on the loan’s tenure. This tenure will depend on your age and ability to successfully repay the loan on time. For instance, a young applicant’s ability to repay a home loan is most likely going to differ from an applicant who is middle-aged or retired. Borrowers will have different repayment capacities when they are at different stages of their lives. This is the reason why lenders consider age while reviewing loan applications.
- Employment record
Being an employee of a reputed public or private sector company or working in an MNC will help improve your housing loan eligibility. If you have a steady job in a good organisation, it is very likely that the home loan EMIs would be paid off without any hassles. This is the reason why most lenders are more likely to offer flexible terms to someone with a record of secured employment rather than someone with an unstable job. You can use a home loan EMI calculator to calculate a suitable loan EMI that you’ll have to pay basis loan amount, interest rate and tenure.
- Type of employment
Even the type of employment will have an effect on your loan eligibility. The criteria will differ based on whether you are a salaried professional, self-employed professional or self-employed non-professional. Also, do note that frequently changing jobs might affect the lender’s decision of approving the loan application.
- Credit score
Looking at an applicant’s credit record gives a clear picture as to how they have handled their debts. With this, the lender gets an understanding of whether the applicant is in a position to repay the home loan or not. This is the reason why it is so important to maintain a good credit score (750+). Many lenders offer lower interest rates on home loans to those with a good credit record as they are considered as low risk. You can also use a good score to get a bigger loan amount. A good credit record will always be helpful irrespective of the type of loan you are applying for.
After learning about the lender’s basic eligibility criteria, you are in a much better position while applying for a home loan. To make the process easier, it is best to make use of a home loan eligibility calculator to be aware of the loan amount you can expect.
