A home loan is a type of credit facility provided by banks and non-bank financial institutions (NBFIs) to individuals who wish to purchase real estate, construct a house on their lot, or remodel and maintain their current residence.
Home loans up to 85% of the project cost are available to applicants; these loans are repaid in EMIs over a 30-year repayment term. Based on your eligibility, interest rates vary from 7.30% to 12%.
Because they can be obtained for significant sums and have lengthy payback terms, banks have tight eligibility requirements for home loans. Lenders take a lot of factors into account when deciding how your housing loan application will be handled.
When you apply for a home loan, the bank will consider your credit score, current loans, salary, and whether you are salaried or self-employed. when examining applications for mortgages. Credit scores are significant to lenders since they demonstrate your ability to repay the loan. Whether the bank gives you a higher or lower interest rate may depend on your credit score. Additionally, whether your loan application is approved or denied.
Top five factors affecting eligibility for home loans
Credit Rating
The most crucial elements in determining whether or not your home loan will be accepted are your credit score and credit report. Four credit rating firms sometimes referred to as credit bureaus, have been granted licenses by the RBI to produce credit reports and ratings.
Together with banks, credit card companies, and other structured lenders, they create and manage records of all credit-related transactions.
Every month, these lenders provide the bureaus with data on all of your credit transactions. This contains details about your EMI and credit card payments, the balance due, any adjustments to your overall credit limit, and any other pertinent data.
Income
The average income is a further consideration. The banks will want to know if you make enough money from your job and other sources to be able to make your monthly payments because there is no collateral. Your chances of being approved for a house loan increase with your income.
Employment Type & Employer: A person who has a history of frequently changing jobs may not be qualified for a mortgage. Since they won’t have a reliable source of income for the duration of the loan and won’t be able to make payments on time. It is a good idea to work for at least a year before being eligible for a mortgage.
Your employment is also taken into account while approving loans. Due to the high monthly EMI that borrowers who take out a home loan are required to pay. Lenders must guarantee that you will have a regular monthly income for the duration of the loan, enabling you to make payments on schedule. They are worried about your chances of finding employment because of this.
They’ll consider if you’ve held a steady job and whether you’ve been in the same place for an extended period of time.
Your credit history
If you believe that because you don’t have a credit history, applying for a mortgage will be simple. You will be unhappy because this element makes it probable that your loan application will be denied. Your lender won’t be able to compare your credit behaviour to anything if you don’t have a credit history.
As a result, even if you are convinced that you won’t experience any problems paying back your mortgage. Your goal of owning a home will come to an end since your bank or lender won’t believe you.
Before requesting a mortgage, make sure you have a solid credit history dating back at least a few years.
Age: Banks typically look for applicants who can repay the loan in full before turning 60. This is the nation’s average retirement age. As a result, if you are young, banks and NBFCs are more likely to grant you a home loan. They advise having at least 10-15 years of experience before retiring. Your age affects both how much money you can borrow and how long the loan will last.