Home loan eligibility depends

What are the factors that decide home loan eligibility?


Here’s what affects your home loan eligibility

Age: Age is the first and foremost factor a lender/ financier considers when one applies for a housing loan. Normally, financial institutions attempt to limit the home loan term to the primary applicant’s age of superannuation. This means young professionals (20s and early 30s) can avail a loan with a term of up to 25 years with no hassles. But older applicants especially those beyond 40 can find it a tad tough to be eligible for an extended tenure. Many a time, single applicant aged 50 and above have been denied home loans purely on this basis.

Income: Let us categorize this into salaried, professional and self-employed. Whichever category the applicant falls into, a steady and regular source of income is must. Basically, there are fewer risks in lending money if the applicant is an earning individual.

Salaried Individual: If you are working for any government department or at any registered private company, you belong to this group. Most banks insists that the applicant should have completed at least one year in the present firm at the time of application. Pay slips, Form 16, bank statements and employer reference letter are the documents almost all lenders demand. Proof for the same is needed for co-applicant and guarantor too (if applicable).

Independent Professionals: Doctors, dentists, architects, engineers, management consultants, chartered accountants, freelance workers etc. belong to this category. Bank statements and ITR papers have to be submitted.

Self Employed: Do you have your own company/ business? Or do you have other source of income like rented properties or hold shares? Then you belong to this category. If you have bank statements and tax-related papers to show, you can certainly apply for a home loan.

Rate of Interest: Home finance eligibility is always inversely proportional to the rate of interest. If the rate is more, eligibility will be less and vice-versa.

Loan Tenure: If you opt for a longer tenure, your eligibility will improve. EMIs too will lesser and manageable. But the downside to this is, you will end paying more interest.

Outstanding Loan(s): Indian banks and financial institutions always recommend keeping the EMI to income ratio between 50 or 60 percent. This is to leave room for future loans or to pay existing loans if any. But unsettled loans could be a great damper on your eligibility.

Credit Report: Banks also scrutinize your credit repayment history from credit bureaus. They keep detailed records of your credit history. A negative entry can bring down your eligibility significantly.

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BB Expert