Home loan qualifying standards are the same for all banks and non-banking financial companies (NBFCs). Nevertheless, there may be special parameters that are applied to each bank based on their needs. Eligibility for a home loan is determined by characteristics such as your monthly salary, present age, credit rating, fixed monthly financial commitments, credit report, age of retirement, and so on. Considering the parameters necessary to be qualified for a home loan might help you make the application process go more smoothly and easily.
Home Loan Eligibility Factors
Age
When applying for a home loan, the first and most important aspect a bank or lender examines is age. Typically, financial firms attempt to minimize the length of a home mortgage to the principal applicant’s retirement age. This implies that young adults in their 20s and mid-30s can easily obtain a loan for a period of up to 25 years.Â
However, older candidates, particularly those over the age of 40, may find it difficult to qualify for a longer duration. Numerous individual applicants aged 50 and up have been rejected by house loans solely on this grounds.
Source of Income
The income of the applicant is categorized under 2 groups: salaried, and self-employed. Whatever group the individual falls into, a consistent and consistent source of income is required. In general, lending money is less risky if the applicant is a working person.
Salaried Professionals
Individuals working for any government department or any registered private enterprise fall under this category. Most banks require that the candidate has worked for a minimum of 1 year in the current company at the time of applying. Salary slips, Form 16, bank statements, and company letters of recommendation, etc. are the document required. Proof is also required for the co-applicant and guarantor.
Self Employed Professionals
Doctors, dentists, architects, engineers, management consultants, chartered accountants, freelance workers, business owners and others fall under this group. Bank statements and ITR documents must be presented.
Rate of Interest
Home mortgage criteria is always indirectly related to the interest rate. If the rate has increased, eligibility is reduced, and vice versa.
Loan Duration
If you choose a loan with a longer-term, your eligibility will increase. EMIs will also be lower and more tolerable. The disadvantage is that you will ultimately pay higher interest.
Existing Loan
Banks and financial institutions usually recommend that the EMI to Income Ratio be kept between 50 and 60%. This is to leave a big window for prospective borrowing or to pay off any present loans. Unpaid loans, on the other hand, may severely limit your eligibility.
Cibil Score
Banks also check the credit repayment record from CIBIL, the country’s regulator and initial credit information bureau. They maintain meticulous records of all information pertaining to your payment history and the relationships you have with lenders/creditors. An unfavorable remark might drastically reduce your eligibility.