The price of property is constantly on the rise and it is often a fact that buying a home for investment or for residential purpose seems a distant dream with one’s personal and available funds. Here is where a home loan comes to the rescue. It is the best way to meet the shortfall of financial resources while buying your own home.
With everything available online, applying for a loan is as easy as a cake walk. But it isn’t the end of the story as the application may get rejected for various reasons. The bank may find low potentiality in your application which adds to their NPA or non-performing assets on the basis of which your application is liable to get rejected. There are various parameters of calculating an applicant’s non- repayment potential.
Let’s have a look at the factors which may either dismiss or endorse your loan application:
- The Age Factor:
Based on your age, the potential of borrowing is considered. Generally, people with age nearing to retirement have high risks of getting rejected. So older the applicant is the more difficult it is to sanction a loan with an extended period of 25-30 years. Most lenders prefer people in their middle ages with a stable monthly income.
- How much can you borrow?
Loan approval is done only after the company has total confidence on your repayment capabilities based on your monthly income. Also if you already have an outstanding loan or liability to your name then the bank calculates your repayment potential accordingly. The sum is deducted from the monthly income and then the potential is calculated. This ensures that your fixed obligation to income ratio doesn’t cross more than 50%.
One way you can increase your borrowing potential is by adding any of your family members as a co-applicant, provided the person is employed with a stable monthly income.
- A good credit score
Like a report card, this provides information about your repayment defaults and misses of loans and credit card bills. Nowadays, most of the banks and lenders pay importance to the credit score to evaluate the percentage of risk in lending money to a person.
If your credit score is low, then consider working towards it. You have to clear all bigger loans and bills before you can apply for a home loan.
- Non-payment of utility bills and others
A multi-layered scrutiny is carried by the banks and lending companies for an applicant. If any delay is found in paying electricity bills, other utility bills etc then the borrowing potential is lowered. Delays in credit card repayment and EMI are also considered here.
- Job stability
The job stability of a person plays a significant role while achieving a loan approval. In this case, a person who has been in a job for two to three years in favoured over someone who has changed too many jobs frequently.
- Builder reputation plays a major role
Opting for a property must be backed by proper background check of the builder’s reputation in the market and legal documents. Properties with good resale value, reputed builder are few factors that the lending company looks for.
- Keep all important documents ready
The documents required should be readily available defaulting which directly will lead to rejection. Keep all documents genuine and ready. KYC details, proofs of income, updated bank statements are the documents compulsory to be provided along with your application.
The above factors are ought to be kept in mind while applying for a home loan, Remember, if you get rejected then take time to reapply.