With repetitive repo rate cuts by the RBI, the interest rates of home loans have gone down in recent times. This has encouraged many individuals to finance the purchase of a property of their choice. According to a TransUnion CIBIL report, the inquiries for home loans rose by 9.1% in November 2020. However, the lending institutions have also enforced stricter home loan eligibility criteria to counter the risk of defaults.
The home loan eligibility criteria vary across financial institutions. Therefore, before availing a home loan, one must carefully check the eligibility requirements to ensure faster approval. There are some crucial factors that can influence the housing loan eligibility of a borrower significantly.
Individuals should carefully assess these factors and try to improve them.
Five factors that determine home loan eligibility
Here are the top five factors that can affect the eligibility of housing loans –
A home loan is a high-value advance that requires several years to be repaid. Therefore, lenders will consider the borrower’s age while approving a loan. Lenders will chalk out a repayment structure for an individual depending on the number of years left as a salaried or working professional.
Younger applicants tend to enjoy better loan terms and quicker approval since they have more years of employment left.
- Credit score
Credit score comes with crucial information about one’s repayment history, loans and credit card dues, number of defaults, etc. Lenders assess the creditworthiness and financial credibility of an individual with this score.
A high credit score ensures higher chances of loan approval. Usually, financial institutions prefer applicants with a credit score of above 750.
Depending on the city or town you reside in, every lending institution will set a minimum income criterion. You should meet this criterion to be eligible for a housing loan from the lender. For instance, borrowers living in metropolitan cities will have to meet stringent stipulations in terms of income. The yearly income of the borrower will determine the loan amount that he/she will be eligible to borrow.
- Employment status
In addition to income, lenders also consider the employment status before sanctioning a home loan. Individuals working in an MNC or a public sector company have higher chances of getting their loan approved. Moreover, lenders also prefer self-employed individuals with stable businesses and incomes.
- Existing financial commitments
While having multiple loans and debts is not a cause of concern for the lenders, it is the repayment pattern that matters. Missing EMIs, paying EMIs behind the scheduled date, and numerous unpaid dues will reduce the chances of loan approval.
Therefore, borrowers need to pay their dues on time to increase the chances of loan approval.
Home loan eligibility calculators
Various leading financial institutions provide online home loan eligibility calculator, which can help determine the exact loan amount a borrower is eligible to avail. A borrower needs to input information regarding personal and income details in the relevant fields to initiate the calculation.
These online eligibility calculators are free and can be accessed anywhere. Individuals can also alter and adjust the values to find a home loan financing solution of their preference.
Documentation required to prove home loan eligibility
Home loan eligibility and documentation go hand in hand. One has to provide valid and relevant documents to support his/her home loan eligibility. Make sure to provide the following documents while applying for a housing loan –
- Documents required for identification – Government photo ID proofs like Voters’ ID card, PAN card, Aadhaar card, passport, driving license.
- Income-related documents – Salary slips for 2 months, bank statements for the past 6 months, IT return slips for the past 3 years.
- Business documents for self-employed individuals.
- Property clearance certificates and other legal documents.
Several HFCs provide pre-approved offers to help borrowers streamline their home loan applications, without having to undergo complicated documentation. These offers are available on various financial products like housing loans, loans against property, etc. To check your pre-approved offer, simply provide your name and basic contact details.
Borrowers should look to improve on these factors to avail home loans in a hassle-free manner against convenient terms.