Applying for a Home Loan is a very significant financial decision, and understanding the eligibility criteria is important to increase your chances of approval. As a prospective buyer, you tend to have many questions regarding your eligibility, especially if you are taking out a Home Loan for the first time.
In this blog, we will explore some of the common concerns people have regarding their Home Loan eligibility.
Credit score
A major cause for disdain among first-time home buyers is the role of credit score. Your CBIL score is determined by what lender institutions assume your creditworthiness is. Hence, a higher credit score naturally boosts your chances of getting a loan. Try maintaining a CBIL score of 700 or more to increase the likelihood of acquiring a loan.
Debt-to-Income (DTI) ratio
The DTI ratio is your monthly debt obligations to your net monthly salary. Lenders use this ratio to determine your eligibility to manage debt without succumbing to it. Hence, it is advisable to pay off as many outstanding loans as you have before applying for a Home Loan, as it will lower your DTI ratio and increase your chances of getting approved.
Importance of employment history
Having a stable source of income acts as a key factor for Home Loan eligibility. Your source of income not only determines your capability to pay the loan but also determines the housing loan amount that can be allotted to you. Frequent job changes or significant unemployment periods can severely affect your chances of securing a housing loan.
Role of down payment
A down payment is the amount of money you are paying upfront from your pocket before securing the loan. The amount of down payment you are willing to put down affects not only your loan amount but also your loan terms. A higher down payment means a lesser loan amount, which automatically means lower monthly EMIs and final outstanding amounts. Making a large down payment also allows you to enjoy flexible terms with regard to your housing loan.
Verification and value of property
Before your financial institution finalises your loan, it verifies the property’s credibility in terms of its value and location. It also checks the project’s authenticity to ensure there are no legal inconsistencies in the house in question.
Age
Your age determines the tenure for which a housing loan can be approved. The younger you are, the higher the tenure you are eligible to receive. However, longer tenures can also mean a high rate of interest. Sit with your loan officer or use a Home Loan eligibility calculator to find out the best tenure and monthly income for yourself.
Low processing fee
You are always required to pay a processing fee on your housing loan amount. However, this fee is applied after your loan is sanctioned. Ideally, you are charged between 0.25% and 1%. If you have a good CBIL score and have paid a larger down payment, you can get a waiver of the processing fee, bringing down your outstanding loan amount.
Can the application get rejected due to non-fulfilment of eligibility requirements?
The financial institutions are completely in power to reject your housing loan application. If they find incomplete documentation or do not meet the income requirements, your housing loan application can be rejected.
Conclusion
Understanding these common eligibility-related queries can help prospective borrowers prepare effectively for the Home Loan application process. To navigate the complexities of Home Loan eligibility and secure favourable terms, it’s advisable to consult with financial advisors or mortgage professionals.
