Top 6 Factors that Influence your Home Loan Eligibility

A lender wants to approve Home Loans for applicants who are financially capable of repaying their EMI without defaulting on payments, and the only way a lender can determine this is by ensuring that the borrower meets the eligibility criteria laid out by the borrower. These Home loan eligibility criteria are important for borrowers because meeting them entitles them to preferential lending terms such as lower interest rates, larger sanctions, longer terms, faster approvals, and an overall hassle-free experience.

Age

When applying for a Home Loan, your age is an important eligibility criterion to consider because the lender prefers to approve loans for younger applicants who are just starting out in their careers because they can be much more aggressive with payments and are less likely to default on their monthly instalments. An applicant nearing retirement age may still be approved for a Home Loan, but the terms of the loan are less favorable. 

CIBIL Score

Maintaining a healthy CIBIL score is critical because a lender will conduct a thorough background check to determine your creditworthiness. A CIBIL score of 750 or higher ensures that you will receive favorable lending terms such as higher loan sanctions, lower interest rates, and faster approvals. 

Existing Debt

It is recommended that you clear your outstanding debt before applying for a Home Loan because a lender will assume over 50% of your monthly income towards the repayment of your Home Loan EMI and if you have existing debt that is already utilizing over 50% of your income, the lender will be hesitant to approve your Home Loan application.

Monthly Income

Your income is important because you will be repaying a prescribed amount in EMIs every month, and this varies depending on your city of residence, as an applicant residing in a tier 1 city will have a higher monthly income criterion than someone residing in a tier 2 city.

Employment Status

Your employment status is important in determining your Home Loan eligibility because lenders prefer to approve loans for people who have a steady source of income. A self-employed applicant must have a 5-year-old business that is capable of generating a consistent source of income, and a salaried employee must have a minimum of 3 years of work experience at an MNC, a public or private sector company, or both.

Down Payment

A lender will only sanction up to 80-90% of the property's valuation, which is determined by your property's Loan-to-Value (LTV) ratio, and the remaining amount must be furnished by you in the form of a down-payment; failure to make the payment may result in the rejection of your Home Loan application.

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