Factors Affecting a Borrower’s Eligibility for A Home Loan

Since home loans can be costly and a long-term commitment, lenders are very cautious when it comes to sanctioning such a loan. They sanction loans only after proper scrutiny. Therefore, a borrower must fulfil various parameters set by the lender if they wish to be eligible for a loan. Let us look at these factors in detail. 

Major Factors That Affect Your Home Loan Eligibility

Here are the key factors that affect your home loan eligibility.

Age – Your age decides your capability to repay the loan. For any salaried or self-employed individual, a loan at the beginning of the career means having enough time to repay the loan than a person who is above 50 and therefore, has less credibility with the lender.

Income – Based on the city of your residence, each lender decides the minimum income requirement for sanctioning the home loan. Meeting the salary benchmark instils confidence in the lender about the repayment capacity of the borrower.

Employment Status – Being with a reputed public or private sector company enhances your chances for home loan eligibility. However, stability in the employment status is also a must for a borrower to be eligible for a housing loan. If you are a self-employed individual, you must be able to show at least a few years of business continuity. 

Dependants – Even if all other criteria for housing loan eligibility are met, having a large number of financial dependents, lowers your chances of receiving a house loan. It raises questions about your ability to repay the loan within the given tenor.

FOIR –The banks check the Fixed Obligation to Income Ratio of the borrower based on the monthly income, installments on any current loans, other EMIs, as well as the potential EMIs of the prospective loan. It has to be below 40% to meet the housing loan eligibility.

Debt Obligation – Your housing loan eligibility criteria are also affected if you already have availed of several ongoing loans. Banks use this factor to determine if you are regularly taking debt or if you are a careful borrower who pays off his debt timely.

Credit Score – A good CIBIL Score of 750 and above boosts your chances of meeting the housing loan eligibility criteria. Timely and regular payment of credit card dues and monthly installments or EMIs show your seriousness in settling any debt and make you creditworthy

Property Value – Lenders may visit the property and examine its location, building specifications, and market value to decide the eligibility criteria and the loan amount they would offer against the property.

Summing Up

Thus, several factors come into play while determining the housing loan eligibility of a person. In other words, lenders just want to make sure of your financial credibility and that you can repay the entire loan amount within the agreed tenor before sanctioning it. So, take a note and plan well before applying for a home loan.