Owning a house of your own is a dream, that most of us strive to fulfil. In this process, people often head toward the banks to seek loans. It has become a common and well-known phenomenon in today’s day and age. There is a variety of loan schemes available both online and offline. The list goes as home loans, personal loans, car loans and even gold loans. Differentiated into two kinds secured loans and unsecured loans. In this article, out of all the options available, we are going to discuss in detail home loans.
Home loans or house loans are where the applicant pledges their residential or commercial property as collateral to the lender. The interest rate of this loan can be changed or adjusted according to the borrower’s needs. You as a borrower can estimate the loan amount by using a home loan calculator available online. The particular tool requires information, like income, age and credit history. Also, the home loan eligiblity calculator helps with adequate fund collection and helps you avoid last-minute changes.
Eligibility criteria for a home loan
Before we check and understand the factors that make you eligible for a home loan, let us dive deep into the regular eligibility criteria. Which are as follows:
- Both Indian and Non-residential Indians can apply.
- 18 to 70 years is the required age.
- Both salaried employees and self-employed can apply.
- Salaried employees need to earn Rs. 25,000/month.
- You need to have at least 2 years of experience at your current job.
- Your LTV (Land to Value) ratio should be 90%.
- You can pledge any kind of property, residential, commercial or even under construction.
Factors affecting home loan eligibility
Now that we have understood the general points that derive home loan eligibility, let us now dive into further details.
Income of the applicant
The income of the applicant is a very important factor in making him/her home loan eligible. The bank checks your income to ensure whether or not you have the capacity to repay in time. They check your monthly salary. Usually, EMIs, which are more than 40 – 45% of your monthly income, do not get approved. Hence, do check your capacity to repay the loan beforehand, using a home loan eligiblity calculator.
A credit score or CIBIL score is granted by lenders. Your credit score shows your discipline when it comes to repaying the EMI amount within a scheduled tenure. A credit score of above 700 points is an ideal one. And banks usually look forward to granting quick loan amounts to applicants alike. Maintaining a good credit score only helps you more since this shows your worthiness for the loan.
Employment status of the applicant
No restriction is issued on what kind of employee you should be. You need to have at least 2-3 years of working experience in your current job. Whether you are self-employed or a salaried employee, the conditions are the same. If you constantly keep changing your occupation that can make you seem unworthy of the home loan. Your job profile shows the lender your state of financial stability. You need to be careful with your employment status during the tenure of your loan.
Age of the applicant
The age of the applicant is also an important factor taken into consideration. The lender takes into consideration of your age to check for how long will you be able to pay the EMIs. If you are 18 or above, then you will have a benefit over those who are now in their old or retirement age. The older you get, the more the lender starts to wonder if you have the repayment capacity. However, there are certain banks that offer home loans or regular loans to pensioners and senior citizens as well. Here, you need to have an account with the bank prior.
More than one loan
Having issued more than one loan or even having previous unpaid debts can cause problems. Hence, being disciplined in the sense of paying timely EMI’s is beneficial in the long term. Avoid taking multiple loans at once. It will not only hamper your credibility as a lender but also cause an unwanted financial burden in the long run.
The property in concern is also taken into consideration. If the property is worth more, the loan amount is high and vice versa. Make sure to use a property that has the potential to increase in value over time.
Home loans are the best option if you are looking or waiting for a dream property of yours. They provide low-interest rates of 6.40% p.a and can give you a tenure of 2 to 30 years, depending on the lender. Also, they are affordable and adjustable according to the applicant’s needs. Hopefully, this article gave you a good summary of home loans and their application ways.