An individual that decides to buy a house is most likely thinking about applying for a home loan. This is because of the current property prices, especially the ones in metropolitan cities. Now, a home loan can cover up to 75%-90% of the cost of a property, depending on the property value. However, before they apply for home loan plans, borrowers need to be sure of their home loan eligibility. Every financial institution takes into account certain factors based on which they decide whether to accept or reject a loan application. The loan amount that the lender agrees to approve can also depend on the borrower’s eligibility.
So, let’s take a look at the factors that impact a borrower’s home loan eligibility:
The applicants that are applying for a home loan at a time when they are closer to retirement might find it difficult to get their applications approved. If borrowers retire in the middle of paying off their home loans, they might face difficulty in clearing off the home loan EMI payments post retirement. This becomes a risk for the lender. It is advisable to apply for a home loan as soon as possible to complete the entire home loan repayment tenure while earning an active income.
- Employment record
Any financial institution would accept a loan application only after making sure that the borrower will be able to repay the loan without any trouble. An applicant with an unsteady job or someone who is not earning a regular monthly income is obviously a risk for lenders. This is why one should maintain a good tenure with a reputed organisation. This will help not just increase one’s housing loan eligibility, but also the chances of a lender offering better terms.
- Credit score
Lenders offer various types of loans, and for each one of them, an applicant’s credit score is always evaluated. A bad credit score could be the result of delayed payment or multiple loan defaults, which is a negative sign for any lender. Ideally, borrowers should always maintain a credit score of 750 or more.
- Home loan repayment tenure
A lot of people are unaware of the fact that the repayment tenure they choose can also end up affecting their home loan eligibility. Choosing a long-term repayment tenure can help with boosting an applicant’s eligibility since the EMI payments would be lower, which makes it easier for the applicant to pay off the instalments, thus decreasing the lender’s risk.
- Existing debt
If an applicant is already deep in debt, they might not be able to accommodate a home loan. This is why lenders are likely to reject a loan application from someone who is already repaying multiple loans. To improve one’s home loan eligibility, it is better to pay off any existing debt.
Lastly, make use of a home loan eligibility calculator, which is freely available online. This calculator will help in understanding the loan amount that the user can qualify for based on their home loan eligibility.