Top 10 Factors That Affect Your Home Loan Eligibility

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7 min 21 May 2024

Factors That Affect Home Loan Eligibility

Highlights

Housing Finance
Factors That Impact Your Eligibility

Owning a house is an important investment that requires substantial capital. Housing finance can provide large funds to help you achieve this goal. Most banks and lending institutions extend favourable offers on Home Loans with customised repayment options and flexible tenors making it easier for eligible individuals to buy a house.

However, some people fail to obtain housing loans since they do not meet the requisite criteria such as regular income, age, and various other factors considered for Home Loan eligibility.

What are the Factors That Impact Your Loan Eligibility?

There are several aspects to examine before taking a Home Loan in India, significant among them being Home Loan eligibility. Lenders have specific parameters that applicants must fulfil to qualify for a housing loan. Therefore, it is important to understand the factors affecting Home Loan eligibility, which include:

1. Age

Lenders normally set an age limit for potential borrowers. Younger applicants can be eligible for a longer repayment tenor whereas the applicants nearing retirement age may have to repay the loan in a shorter loan tenor.

2. Income

Income is a defining aspect of one’s repayment abilities that safeguards against probable defaults. A stable income helps you manage EMIs conveniently, which is why lenders evaluate an applicant’s financial situation right at the onset.

3. Credit Score

Credit ratings give lenders a fair idea of your financial history. It indicates the way you handle liabilities, whether you can be entrusted with a Home Loan and how responsibly you may repay the EMIs. Generally, a CIBIL score of 750 and above is favoured as it denotes high creditworthiness. On the other hand, a lower credit score negatively impacts the credit behaviour thereby reducing loan eligibility.

Additional Read: What is a Good CIBIL Score for a Home Loan

4. Employment Status

Salaried employees should typically possess two to three years of work experience in the present organisation to obtain loan approvals. Holding a stable job with regular sources of earnings assures lenders of timely repayments. In the case of self-employed applicants, lenders assess their business performance to determine eligibility.

5. Loan Amount

Opting for the appropriate loan amount per your eligibility ensures easier EMIs and quicker approvals. Remember, even if you are eligible for a higher sum, avail of what you need. A higher principal might make EMI payouts tougher. Furthermore, missed or delayed payments can adversely affect your credit score and future credit eligibility.

You can access an online Home Loan Eligibility Calculator to view the amount that you are eligible to borrow. It is easy to use and requires the following inputs:

Total monthly income
Preferred repayment period
Home Loan interest rate offered by the lender

This financial tool computes the given data instantly. It displays the loan and EMI amount basis the input provided giving you a realistic picture of the proposed loan.

6. Loan Tenor

Loan tenors for Housing loans typically extend up to ###HL-TENOR_HL### years. However, you can enjoy the benefits of this flexible tenor only if your age falls well within the maximum age limit at the time of loan maturity.

Additional Read: How to Pick the Right Home Loan Tenor

7. Current Obligations

The status of your ongoing loans and credit card payments tells lenders whether you are capable of handling further credit. If you are not left with sufficient funds upon repaying the existing debts each month, lenders may not approve the loan request. In such a scenario, you could try paying off your previous loans and other pending dues. You may also include any extra earnings, regular bonuses or rental income in your loan application; or even a financial co-borrower to boost eligibility.

Additional Read: Checklist of Documents Required for Home Loan

Conclusion

Home Loan eligibility can make or mar your Home Loan application. If you have the right eligibility, lenders offer preferential loan deals. You can avail of loan amounts at low interest rates with comfortable repayment tenors. However, if you are not able to meet the Home Loan eligibility, you should to enhance your eligibility first before you apply for a house loan to evade loan rejections.

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