Are you thinking of buying a home anytime soon? You will naturally want to apply for a home loan in this regard. It should be mentioned that almost all financial institutions have specified home loan eligibility criteria in place and this is what you should be careful about prior to applying. While the criteria can vary from one lender to another, there are a few universal factors that will naturally be common across financial institutions. These include the ability to repay the loan, financials, credit history and score, value of the property and current relationship with the financial institution in question.
Here’s decoding home loan eligibility across most financial institutions:
- Age- Most banks will need borrowers to be at least 18 years of age with the maximum age limit being 70 years in many cases. Those who are younger can get loans for longer periods although long tenors may be tough for people taking home loans when they are 45-50 years of age.
- Monthly Income- The lender will be analysing your monthly income and work out your loan eligibility likewise. You should provide documentation that proves your source of income.
- Tenor- You should keep in mind that choosing a longer tenor may equate to lower monthly EMIs but you will have to pay more interest in turn. However, a shorter tenor may mean higher EMIs but you will pay much lower in terms of interest costs.
- Credit Score- 650 and above is the minimum threshold for credit scores when it comes to getting home loans approved. 750 and upwards is even better.
- FOIR- Fixed Obligation to Income Ratio is a major benchmark that influences overall home loan eligibility. This covers all the fixed expenses of the customer every month including current EMIs, rental income and expected EMI on the proposed loan amount and this has to be 50% of the net monthly salary for your loan to be approved.
- Value of the Property- The loan amount will naturally be limited to 75-90% of the value of the property. LTV is thus another important parameter for home loan eligibility.
- Nature of employment- Banks will prefer those who have stable employment with reputed companies/employers.
- Property aspects- There will be a technical assessment done by financial institutions for the property in question which includes verifying the title deed, sanction plan, value and so on. The builder should have approval and banks will not sanction loans against properties which are 20-25 years old. In case the property is not built on the basis of the sanction plan, the home loan application may be cancelled.