Most Indians dream of getting a house of their own. In fact, an RBI report suggests that 84% of Indians have invested in properties, most of them for buying a house of their dreams. Earlier, people bought a property later in their careers. That was because the cost of buying a property was very high. Even though the costs remain equally high, more and more people are looking to fulfil their ambitions at a younger age.
This trend can be attributed to an array of home loans on offer in the market. A home loan is an easy tool to help you buy your house. But, a number of factors can affect your home loan eligibility. Lenders look into a number of features to ensure you are ready to meet long-term financial expenditure.
Let us look at different elements affecting your home loan eligibility.
Age plays a vital role in determining your eligibility amount and duration of a home loan.
Most banks and non-banking financial companies (NBFCs) favour granting loans to younger people. This is because the retirement age is relatively further away.
Lenders want to know how long you have served in your current job. The longer you work in a company, the higher the eligibility amount usually is.
If you have moved jobs a lot, it will show negatively on your competency of retaining a job. A stable source of income will increase your home loan eligibility. Job-hopping makes lenders uneasy to grant higher loan amounts.
Lenders use CIBIL to evaluate your credit history. To get a favourable home loan, your CIBIL score should be higher than 800 (out of 900). Your loan application might get declined by the lender if you have got unpaid credit or pre-existent debts, or have defaulted on loans previously. To assure that you have an acceptable credit rating with CIBIL, have a good mix of timely-paid secured and unsecured debts.
If your home loan need is higher than what you are entitled, little changes can help you in increasing your eligibility amount. Here are some tips that can help in increasing your home loan eligibility:
- Including spousal income: Cash flow earned by your spouse can be an added bonus point if the home loan is applied together.
- Raising your tenure period: If your EMI is high, your home loan request might get rejected. But, if you raise your tenure period, the EMI will be less and, therefore, stand a better chance of securing a loan. Raising the loan tenure is a good way of reducing your monthly instalments.
- Added earnings: Consistent added earnings such as income from house rent count as additional income. Rent income, perks, bonuses, performance-linked pay etc. are additional forms of income that can enhance your loan eligibility.
- Clearing existing or previous loans: Lenders will use pre-existing loans as grounds to cut down the loan amount you are eligible for. Ensure that you clear your old loans and update the record in your CIBIL credit score.
- Employer-Bank affinity: A lower interest rate will greatly raise your home loan eligibility. Ask bank representatives whether there are any discount rates extended to your employer. Lenders generally classify organisations based on industry/company profiles and offer varied schemes like special interest rates, processing fee release etc.
To sum up
An important point to remember is that having many loans can reduce your creditability. Keeping an excellent credit score is also highly critical to getting a home loan of your choice. Timely payments will prevent you from getting into loan traps and will increase your creditworthiness in the near future.