Published on October 30th, 2016 | by Guest0
Top Factors That Affect Your Home Loan Eligibility
Even though banks and finance companies always seem very eager to disburse home loans, the actual process is subject to a lot many terms and conditions, including numerous eligibility criteria. These criteria differ from one lender to another, but their main intention is to ensure that the lender is able to make its loan as secure as possible and make certain that the loan applicant is in a position to repay the loan back. The imposition of the criteria allows the lender to filter out those applications that may pose a risk of default. Some of the most important eligibility criteria are:
The amount of home loan that you will be able to get has a direct correlation with your income. This is perhaps the factor that has the biggest impact on your loan eligibility. The more your income is, the more the chances of your being able to pay back the loan and the accrued interest. Banks also assume that the income of a salaried employee is more stable than that of a businessman, whose fortunes could change very easily with a downturn in the market conditions. This makes it easier for salaried persons to get home loans more easily when compared to those who own businesses.
Of course, the bank will ask you to submit your salary statement as well as the bank statement of the account where the salary is credited for the previous six months as well as income tax returns for the last three years to verify the stability of your income. Many of the perks and allowances you get such as LTA and medical may not be included by the bank when calculating your annual income. If you are self-employed then you would also have to furnish to the bank the IT returns for the last three years as well as the profit and loss statement and balance sheet duly certified by a chartered accountant.
The age of the loan applicant is also a significant factor taken into account by the lender since this is a reflection of the time that the applicant will have to pay off the loan. Banks will not generally extend a loan for which the EMIs end after the retirement of the applicant. This effectively means that a person who is 30 years old will be easily eligible for a 25-year loan but for obvious reasons, the same will not be applicable for someone who is 50 years of age, because it is for sure that he will attain his retirement age in a maximum of 10 years. This basically means that an older applicant will get loans for a shorter period and his EMIs will generally be higher. Alternatively, the loan amount will be adjusted downwards to keep the housing loan EMI affordable.
The credit history of the applicant comes under intense scrutiny during the application evaluation process. Every person is allocated a credit score by CIBIL, and the report will reveal if the person has defaulted on any of the loans or credit card payments in the past. If the credit report is really bad, the applicant may be refused a loan, but otherwise, the amount of loan sanctioned may be lower even if the person has an income level that would have made him eligible for a higher amount.
Profession and Category of Employer
There are certain professions that lenders classify as being risky so they prefer not to extend home loans to people working in them. Lenders prefer applicants to have a stable income over the term of the loan, so if you are working in an industry that is subject to fluctuations then your application can be downgraded. On the other hand, those in government jobs, the manufacturing or finance sector are viewed more positively.
Lenders are extremely conservative as far as home loans go even though they have the security of the asset. They employ a combination of many factors to help them decide the maximum amount that can be given as a loan without compromising their ability to get the repayment in full and on time.