Why do people need home loans? We all have a dream to own a home one day that we bought with our own money but it is a very challenging thing to buy a home in cash. A normal person with an average salary needs at least 30 to 40 years to save money in order to buy a standard house.
Does that mean that a person needs to spend 30 to 40 working years of his lifetime to live under the roof of his own home? Of course not.
There are many banks that offer home loans at a very low-interest rate to potential buyers. Here in this article, we talk about all those things you need to know before applying for a loan to buy a house.
What is Home Loan Eligibility?
If you have plans to buy a house and you don’t have that kind of money right now and you wish to apply for a home loan then the first thing that comes into your mind is the eligibility criteria for a house loan.
First, you need to understand the house loan eligibility criteria. Home loan eligibility is defined as a criterion based on which a financial institution evaluates the creditworthiness of the customer to use and repay a certain loan amount.
Eligibility for a home loan depends on criteria such as age, financial status, credit history, credit report, other financial obligations, etc.
Home Loan Eligibility Criteria
If a bank sanctions a large amount of money to you so that you can buy a home with that money. So it is quite obvious that they will check certain things about you and your financial background before entrusting back money to you.
You need to have some eligibility criteria to become a worthy person of that loan in the eyes of the bank. Here are those criteria that any bank sees even before applying for a home loan.
- Current age and remaining working years: The age and the remaining working years of the applicant play the most important role in loans for homes. Every bank maximum has a 30-year loan term for borrowers.
- Applicants’ Age Limit (Employed by someone): Age is also an essential factor in house loans. The individual must be above the age of 21 and under the age of 65.
- Applicants Age Limit (Self-Employed): There used to be some differences between a salaried person and a self-employed person but not anymore. In both cases, you must be above the age of 21 years and under the age of 65 years.
- The minimum amount for salary: If you are a salaried person then you must receive 10,000 rupees per month.
- The minimum amount for business: If you are a business man then you must generate an amount of 2 lac rupees per year.
- Maximum Loan Term: You can have a loan for a maximum of 30 years.
- The financial status of the applicant: The financial status of the loan applicants has a significant effect on determining the loan amount for the house. The present and future income of the loan applicant is a crucial fact for banks.
- Credit score: The past and present credit history of the applicant is very important for the bank. If you have a clean repayment record then the chances of getting a house loan are higher.
- Other financial factors: Other liabilities like a car loan, credit card debt, etc. are essential factors in house loans.
How Is Home Loan Eligibility Calculated?
There is a proper process by which anyone can calculate house loan eligibility by putting some input in the calculator. Yes, there is a house loan calculator and almost every bank’s website has one on their sites.
You can easily visit those sites and calculate your eligibility criteria all by yourself. First, you have to put your gross monthly income on the gross income tab and then set the time limit (In years) that you want that loan.
Then input the interest rate of that particular bank and at last input the EMIs of the other loans if you have any.
Factors That Affect Home Loan Eligibility
When an applicant applies for a house loan the bank has to go through a process before sanctioning the loan. Ensuring the eligibility criteria of the borrowers is one of the most important and first things that any bank does. An applicant’s eligibility primarily depends on their income and repayment capacity. There are some factors that affect home loan eligibility:
- The age of the applicant.
- The credit history and the previous credit score of the borrower.
- Financial position of the person who applies for the house loan.
More On How To Improve Home Loan Eligibility?
If you want your home loan sanctioned without facing any difficulties then there are some things that you can do to improve your loan eligibility criteria.
So that the bank can ensure that you are indeed the worthy and responsible person who can handle that money and repay the debt within the time limit. Things that you can do as an applicant to improve your house loan eligibility:
- You can add another member of the family as a co-applicant.
- Utilized a structured repayment plan for the loan.
- Entrusted banks with a steady income and have regular savings in the personal savings account and do investments.
- If you have then put details about your regular additional income sources.
- Repay the current loans and short-term debts if you have any.
- Rectify errors in your credit score if you have any.
- Keep track and make a record of your multiple salary components.
Conclusion:
Here are all the things and factors about the home loan that you need to know before applying for one. There are some factors that you need to take extreme care of.
People who want to apply for a loan to buy their own home must have a proper understanding of how things work during the whole process of the loan. Hope this article will help you and you find it useful.
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