Have you ever given thought to what factors a lender considers while approving your home loan application? Or simply, how does the lender of either a home loan in Coimbatore or a home loan in Dehradun or any other city determine that you, as a loan applicant, will not miss out on default on your home loan? Read here to get answers to most of your questions.
When it is about obtaining a home loan, your loan eligibility is scrutinised by the lender through various parameters. These include –
Eligibility criteria
Current age and your remaining working years
You, as an applicant, play an important role in deciding your home loan eligibility. With the highest loan tenure usually being capped at 30 years or till retirement age, you as an individual can avail of any repayment tenure as per your requirement and cash inflow. Moreover, the longer the work life you have, the better loan terms you may get owing to your young age and higher work expectancy.
Financial position
To make sure that you service your loan periodically, your current and future income may have a substantial impact on deciding your loan proceeds. Alongside the income quantum, the quality and stability of income are even considered.
Previous and current credit history, as well as credit score
A clean and good repayment record can add credence to your application for a home loan. Additionally, a strong credit score means the chances of you missing out or defaulting may be minimal. This auger well for home loan lenders.
Also Check: Home Loan in Dehradun
Other crucial financial liabilities
Home loan lenders may even assess your existing liabilities, like your credit card debt, car loan, etc., to make sure whether you can bear the incremental burden of an additional loan.
Personal profile
Your thorough personal profile, i.e., your background, educational degrees, qualifications, etc., will even play a crucial role in your loan approval.
Crucial traits of your property that you are giving up for a mortgage
Home loan lenders factor in certain specifications that your underlying property must abide by, like your property’s age, its size, and others. If it fails to comply, then the loan application may be turned down.
Guarantor to existing home loan
In case you are a prevailing guarantor to a home loan, the lender may consider it to be a loan that you are currently holding and will even consider it when deciding your eligibility for a loan. Moreover, in the case you, as a borrower, default, then it might have a negative impact on your credibility. Together, all the above parameters will permit the lender of a home loan to decide your loan’s terms and conditions as well as the repayment schedule.
Read on to better understand the formulae.
Once the lender of a home loan gets all your information, it calculates specific ratios to compute your home loan eligibility.
The ratio of instalments to income
This ratio shows the lender percentage of income that you may set aside for the repayment of your loan. As per assumptions, roughly half your income would be a must to take care of your daily expenses, and with the remaining half, if left, then the lender may consider providing you approval for a home loan.
FOIR (fixed obligation to income ratio)
Here, the lender factor in the other loan EMIs to understand that home loan eligibility chances.
Loan cost ratio
This ratio determines the property’s market cost that is being funded by the lender than the amount funded by your own finance. This is a way to tell the equity that you have in the property.
How can you increase your eligibility for a home loan?
Your home loan eligibility is basically dependent on your income and repayment potential. Here are some of the crucial pointers that can assist in enhancing your home loan eligibility.
∙€€€€€€ Include an earning family member, like your spouse, as a co-applicant to a home loan.
∙€€€€€€ Explore the different possibilities of opting for a structured repayment plan with a lender.
∙€€€€€€ Make sure that you hold a steady income flow as well as regular investments and savings.
∙€€€€€€ Furnish details about your regular additional income sources like rental income from another owned property, business income besides employment, etc.
∙€€€€€€ Know your score and take the required measures to correct the errors or ameliorate your credit score.
∙€€€€€€ Keep a record of variable salary constituents like commissions, performance bonuses, overtime, and others.
∙€€€€€€ Repay your existing loan & short-term debts
To make the home loan application process very simple, various lenders have started giving the facility of reviewing your eligibility for a home loan through the online platform with the assistance of various calculators. Once you get the accurate figure of your EMI proceeds and your eligibility by using the calculator, you can move ahead to place the home loan application with your selected lender.
Frequently asked questions (FAQs)
What are the crucial factors considered by the lender to decide your home loan eligibility?
Important factors considered by the lender to determine your home eligibility are –
∙€€€€€€ Your income and your loan repayment capacity.
∙€€€€€€ Other crucial parameters include your retirement age, existing age, credit history, financial position, and credit score.
How can you increase your borrowing potential for a home loan?
Important factors through which you can enhance your home loan’s borrowing potential include –
∙€€€€€€ Include a co-applicant to the loan who must be an earning family member.
∙€€€€€€ Go for a structured repayment plan.
∙€€€€€€ Ensure a steady flow of income, regular investments, and savings.
∙€€€€€€ Furnish details about your regular additional source of income.
∙€€€€€€ Keep a detailed record of your variable salary constituent.
∙€€€€€€ Take action to rectify errors or mistakes that may be responsible for pulling down your score.
∙€€€€€€ Repay your existing loans as well as your short-term debts.
How can you check your eligibility for a home loan?
Home loan eligibility is basically dependent on parameters like your repayment capacity and income. There are various other parameters that decide your home loans, like your age, credit history, credit score, other crucial financial obligations, and others.
