5 Things Which Are Considered to Determine Your Home Loan EligibilityFebruary 14, 2020
Reports indicate that housing credit has grown by 15% in the financial year of 2018 for HFCs with projections suggesting similar growth the financial year 2020. This indicates that more individuals are opting for a home loan than the previous year, but to gain success on your loan approval, you need to know about the home loan eligibility.
Financial institutions offer housing loans to borrowers if they meet the demands of the eligibility criteria. If you fail to satisfy the criteria for home loan eligibility, not only your loan application will be rejected, but there will be a negative mark on your credit score.
Five factors that influence your home loan eligibility –
Financial institutions consider the age of the borrower as a key factor before granting a home loan. The minimum age to apply for a home loan is 18 years, while the maximum is 70 years.
Lending organizations tend to offer longer tenor, of up to 20 years, to younger borrowers compared to loan applicants who are 45-50 years old. This is due to the fact that younger loan applicants have more years of employment ahead of them in their lifespan, thus increasing their housing loan repayment capability.
The Fixed Obligation to Income Ratio is considered as an important factor that influences your home loan eligibility. It is calculated as the percentage of the ratio of summation of all your existing expenses to your net income, per month. If your FOIR is 45%, it conveys that 45% of your income is spent on fixed monthly obligations such as living expenses, bill payments, house rent, daily travel costs, etc.
Keeping a FOIR below 50% indicates that you are generating ample surplus from your monthly income, which can be used to pay your home loan EMIs. Hence, financial institutions prefer those having a low FOIR to approve a home loan application.
- CIBIL Score
CIBIL is a nationally accepted credit rating agency that provides a three-digit score, ranging from 300 to 900, to borrowers based on their credit history. Your CIBIL score reflects your creditworthiness, which is a deciding factor among the home loan eligibility criteria.
If you have existing debts and missed several EMIs, your CIBIL score will drop and thus decreasing the chance of your loan approval rates. Among several methods, you consider opting for a credit card and pay dues timely to improve your CIBIL score for a home loan and avoid rejection.
Financial institutions generally ask for a minimum CIBIL score of 750 or above; it will guarantee you a successful home loan approval, provided other factors of the eligibility criteria are met.
- Down Payment
As per the guidelines of Reserve Bank of India, lenders are not allowed to offer loans that exceed 90% of property value. This indicates that the borrower has to pay the remaining 10% of the property value as a down payment. Contributing more on your down payments helps you decrease the loan amount. A higher down payment increases your home loan eligibility as it reduces the risk for the lender.
Borrowers can take the help of an eligibility calculator for a home loan before applying for a loan at their desired financial institution. You need to share relevant information such as FOIR, age, income, etc. for the tool to calculate your eligible amount.
Purchasing a house is deemed as one of the most important financial investments of an individual’s lifespan. So, before applying, you need to meet the demands of the home loan eligibility criteria to go through a hassle-free application process.