Buying an own house is a lifetime decision. One has to be very careful and selective while purchasing a property. Our dream requires a financial assistance. But like any other loan the lender asks for the documents and the proofs to judge the repayment capacity within the stipulated tenure (time). The first step in the home loan process is to verify the loan amount for which an individual is eligible. The home loan amount can be derived evaluating multiple criteria like Income to repay the loan, Market value of the property in question, the agreement value on which the stamp duty needs to be paid for registering the property in favour of the borrower.
The eligibility includes many criteria s that an applicant needs to meet in order to be eligible for a home loan. Every lender has different parameters to evaluate but there are certain common factors which are preferred to access the loan applicant’s credibility such as age, income, employment type, work experience, financial liabilities and credit history and the type of property he is purchasing.
NO matter what an occupation or profession an applicant possess, it’s important to get a pre-check done to ensure the eligibility before approaching banks. Mudrahome.com saves a lot of time, guides and helps you to get more accurate figures with just few clicks. (To know how to calculate Income eligibility for loan)
The eligibility criteria for a home loan vary from one lender to another. Following are some key requirements that are considered:
The younger the applicant higher the probability of getting loan. The minimum age of the applicant should be 21 years. Most of the banks/ NBFC offer home loan to salaried employees only if they fall between the age group of 21 to 60 years. However for self-employed this limit changes to up to 65 years.
It’s an essential factor for the consideration of home loan. The applicant has to be salaried and employed for at least 2 years in the current profession. Minimum 3 years of total business vintage is required if the applicant is self-employed else home loan will not be processed.
Your current income level plays a vital role to determine the eligibility as well as the maximum limit of the home loan offered to an individual. High monthly income indicates an ability to pay higher EMI’s and there will be better chances of loan repayment on time. For this aspect, the past records of financial stability and the present income status is considered in determining the eligibility for home loan. Good financial records have all the key to success. This can help in deciding the interest rate percentage, loan amount and tenure when applying for loan.
Individual’s credit score has a significant importance. Good credit score increases the chances of getting the loan with more flexible terms and conditions on loan amount, Tenure, EMI and interest rates. Defaults and delays in payments, missed payment tracks, and outstanding loan amount negatively reflect on the applicant’s credit history. This could result in rejection of the loan application or a higher rate of interest. (To know more about credit score)
while lending a Home loan the lenders considers the agreement value/sale deed value of the property. This value is basically a government defined rates ( also known as collector guideline or circle rates or DLC rates) of that particular area termed as circle rate. This is the value on which the purchaser pays the stamp duty/taxes to the government for the purchase of the property and the basis of which the sale deed of the property will be made. Financial Institutions give loans up to a certain percentage of an agreement value.
Property market value
An independent valuation of the property is done by the Bank/NBFC and a loan amount is offered up to a percentage, according to the current market value. This can vary from lender to lender but usually falls in between 75% to 80% of the current market price. This is also done to check if the property is undisputed and meets all the by-laws of construction laid by the government authorities.
Legal Search/Title Search
To check the authenticity of the ownership of the property the lenders do a complete legal search. In this activity the financial institution check the complete chain of the title document/property papers( Sale Deed) right from the time of origination of the property. The lender ensures that the property which borrower is intending to purchase is free from any disputes, hindrances and encumbrances.
The most important Home loan eligibility criteria which should be noted while applying for the loan with a bank/NBFC is that the final sanction amount offered by the financial institution for your home loan would be the lowest of the 3 eligibilities, that loan on your income eligibility, loan on the value of the agreement on which the sale deed of the identified property will be executed and finally the actual current market value of the property
There are chances to enhance the eligibility by:
- Add a co-applicant (preferably an earning member) to enhance your loan eligibility
- Availing a structured loan plan that can adjust with other liabilities
- Ensure balanced income, regular savings & investments
- Add up your additional income sources like rental income if any, or Interest paid on partners capital in case of partnership firm or depreciation claimed etc.
- Repay present loans and short term debts so as to reduce the current EMI obligation which increases your loan eligibility
- Track & rectify errors (if any) in your credit score.