(Disclosure: This post is sponsored by Credit Sudhaar)
Buying a home is one of the most important financial decisions of one’s life.
One needs to be adequately prepared in terms of getting the papers in order and arranging funds for the down payment. Apart from this, one also needs to ensure that the conditions are right so that the Home loan application and approval process goes on smoothly.One needs to make sure that one is not only eligible for the home loan but also get the best home loan interest rates.
For this one needs to understand the factors that affects ones eligibility and make sure that these are favourable. Though different banks have their own distinct criteria for eligibility, the basic factors remain the same.
Home loan providers have strict norms to evaluate your ability to pay off the loan in a certain period of time. The ability of a young person to pay back the loan will be far more than a retired person. A person between the age group of 25 to 45 years has more no. of working years ahead and hence considered more financially stable. Hence many financial institutions have a minimum and maximum age of the applicant that must be fulfilled.
Your academic credentials and current employment status has a major impact on the home loan eligibility criteria. The time period for which you have been employed, your current position in the company, growth prospects and stability are some factors that are reviewed by the lending institute before approving your home loan application. If you have switched too many jobs in the recent past, you may fail to impress the lenders. Lenders prefer people working in government jobs and traditional industries than new start-ups where the employment uncertainty is high.
A steady source of income is a prerequisite for home loan application approval. The banks lend only to people who they are sure will have a regular flow of income for the entire tenure of the home loan. You will need to bring your salary slips for income proof to show that you are earning enough to afford the monthly EMIs. Higher your income, higher will be the amount of home loan that you can get approved for. Self-employed people or people with commission based jobs may find it difficult to get approvals.
Your CIBIL score gives a picture of how you have handled your past obligations. If you pay your EMIs and credit card bills diligently you tend to have a high score.
Banks have very stringent norms when it comes to evaluation of your CIBIL score. They do not approve loans if your score doesn’t satisfy the minimum criteria set by them.
In order to have a high CIBIL score you must pay attention to the aspects that affect your CIBIL score calculation. Payment history, credit utilization ratio and length of credit history are some of the most important factors that affect CIBIL score calculation.
One needs to have a very high score to obtain home loans at competitive interest rates. A higher score reduces the default risk that the bank is exposed to. In case you do not have an impressive credit history, you may look for a co-applicant who has a good credit score.
Alternatively you can apply for subprime loans which offer loans to people with low credit score at a high rate of interest.
No credit score
If you haven’t taken any loans in the past, and do not own credit cards, you may not have any credit history. In such a scenario, banks won’t have any past history to base their decisions of whether they consider you a reliable borrower. Even if you think that you have the ability to repay the loan, banks may not sanction you a home loan because of absence of past credit history. So if you do not have any CIBIL score then pay attention to the factors that affect CIBIL score calculation and work towards building a credit score.
Too much debt
If you have too many loans in your credit report, your debt to income ratio will be high. When a large portion of your income is already used up in servicing past loan EMIs, banks may consider you a risky candidate and reject your home loan application. Pay down some of your existing loans before applying for a home loan to increase your eligibility.
Banks usually sanction only 80% of the property value and the rest amount needs to be paid by the borrower as down payment. If you pay a higher down payment, the chances of loan approval become high.
In order to ensure that you are eligible for a home loan, you will need to pay attention to all these above factors. It is not at all an easy job, but definitely possible.