10 Factors That Affect Your Home Loan Eligibility

Owning a house is an important investment that requires substantial capital. But if you don’t wish to dig into your savings, housing finance can provide large funds to help you achieve this goal. Most banks and lending institutions extend tempting 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, property value and various other factors considered for Home Loan eligibility.

What are the Ten 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 crucial to understand the factors affecting Home Loan eligibility, which include:

1.Age

Lenders normally set an age limit for potential borrowers. They prefer lending to younger applicants because of a long career and financial growth that makes repayments easier. Whereas, those in their 50s or nearing retirement would have fewer working years which may render EMI pay-outs difficult. Hence, lenders show reluctance in tendering loans to such individuals.

2.Income

Income is a defining aspect of one’s repayment abilities that safeguards against probable defaults. A high 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 creditworthiness. On the other hand, a lower credit score implies poor credit behaviour thereby reducing loan eligibility.

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

4.Employment Status

Salaried employees should ideally 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. Nonetheless, they may be offered higher interest rates as compared to salaried applicants due to inconsistent cash flow.

5.Property Value and Profile

Lenders sanction suitable loan amounts after evaluating the property’s market price. If the profile of the house fits the lender’s parameters, your eligibility soars. Typically, housing loans cover 75% - 90% of the actual home cost, basis eligibility.

6.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, you should only avail what you really need. A higher principal might make EMI pay-outs tougher. Furthermore, missed or delayed payments can adversely affect your credit score and future credit eligibility.

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 
• Other EMIs

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

7.Loan Tenor

Loan tenors for Housing loans extend up to 30 years. However, you can enjoy benefits of this flexible tenor only if your age falls well within the maximum age limit at the time of loan maturity. For example, If you are a salaried employee of age 58, then you are eligible only for 4 more years of loan by default (considering maximum age limit to be 62 years) regardless of the maximum loan tenor the lender offers.

Additional Read: How to Pick the Right Home Loan Tenor

8.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 co-borrower to boost eligibility.

9.Down Payment

Lenders only fund a certain portion of your property’s value. The remaining amount has to be borne by the borrower in the form of a down payment. A hefty down payment, which is over and above the minimum requirement, brings down the principal amount to be sanctioned and the resultant loan interest.

10.Documentation

Supporting documentation is critical to loan processing. If your paperwork is not in order, it can affect your eligibility. Every lender may have specific documentation requirements. It is best to verify this list and keep them handy for smoother approvals.

Additional Read: Checklist of Documents Required for Home Loan

To Conclude

Home Loan eligibility can make or mar your Home Loan application. If you have the right eligibility, lenders will proffer preferential loan deals. You can avail of bigger loan amounts at the lowest interest rates with comfortable repayment tenors. However, if found lacking, you need to enhance your eligibility first before you apply for a house loan to evade loan rejections.