4 Important factors affecting your Home Loan Eligibility

4 Important factors affecting your Home Loan Eligibility

Home loans are offered by banks and non-banking financial institutions at attractive terms and conditions. The loans allow you to build or buy your dream home and are, therefore, quite popular. However, lenders have prescribed Home Loan eligibility criteria for borrowers. Only if you meet all the criteria specified by the lender would you be able to avail of the loan and get the funds? Among these eligibility parameters, there are four most important factors which determine your home loan eligibility.

Let’s understand what these factors are and how they affect your eligibility for a home loan –

Your credit score

Your credit score is the most important parameter on which your home loan eligibility depends. The score is a measure of your creditworthiness and which helps the lender to s estimate whether the loan would be repaid with ease or not. For availing a home loan you need a credit score of at least 700 and above. The higher the credit score, you have the better it would be your chances to avail of the loan easily.

Your income and its stability

Another important criterion based on which a home loan is offered is the income that you earn every month and how stable the income is. There is a minimum income criterion for salaried and self-employed borrowers. Usually, a minimum net monthly income of INR 25,000 is required for salaried borrowers. For self-employed borrowers, their business’s annual turnover is considered. Only if your income or business turnover is up to the minimum income limit can you can avail of a home loan.

Income stability is judged by how stable you have been in your occupation. In the case of salaried borrowers, the lender requires continuous employment of 3 years or above in preferably the same organization. For self-employed borrowers, the business vintage is taken into consideration and lenders offer a home loan only if the business has been in existence for the last 3 or 5 years.

The criteria of minimum income and stability are required so that the lender can make sure that you have sufficient income at your disposal to pay off your home loan. Moreover, if the income is stable, the chances of loss of job or business become low and the lender is assured of a continuous income flow which would help you pay off your loan.

Your age

Your age also determines your loan eligibility. Home loans are offered to individuals who are aged between 18 years and 70 years. The minimum age criterion might also depend on the nature of occupation as lenders fix varying ages for self-employed and salaried borrowers. Your age also determines the maximum repayment tenure of the loan. Lenders, usually, require their home loans to be paid off before you reach 70 or 75 years of age. So, the age at which you avail a home loan would decide your repayment tenure.

Existing liabilities

If you have existing liabilities, your net disposable income would reduce. This would also reduce your repayment capacity so the loan amount offered would be reduced.

So, before applying for a home loan know these four important factors which might affect your loan eligibility so that you can apply for the loan knowing all the terms and conditions associated with it.

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