In recent years, the real estate market has witnessed a massive boom. As a result, the prices of residential properties are touching the sky, which has ultimately led many people to move towards a home loan. It is almost impossible to buy your dream house nowadays without the help of a home loan.
It is a well-known fact that to avail of a home loan, it is essential to know your housing loan eligibility. While a home loan helps your dream come true, there are various factors that you need to keep in mind that affect it.
What is a home loan?
A home loan is where you have to mortgage your property to your lender. You then have to pay a portion of the principal amount, along with interest, through Equated Monthly Installments (EMIs). Also, both the principal amount and interest qualify for a tax deduction. So, when you go for a home loan after checking the housing loan eligibility, you gain complete ownership of the property at the end of the tenor.
What is home loan eligibility?
It is a criteria basis where a financial institution or bank assesses whether an individual is creditworthy or not to avail and repay a loan. The two main factors of loan eligibility are income and the borrower’s repayment capacity. However, other factors include age, financial position, credit score, etc.
What are the top four factors that determine your housing loan eligibility?
The prime factor determining whether you are eligible for a home loan is your income. As there is no collateral here, financial institutions want to know that you have a good income from your job and other sources that allow monthly payments.
No credit history might be a hurdle for those looking for a home loan. With no credit history, the lender will have no reference point to use while analyzing the credit conduct.
Employment status also plays an important role. For example, suppose you are employed with a reputed company or are a self-employed individual with a stable income. In that case, it makes you more reliable as a borrower than those with an unstable job or business.
Another important factor for home loan eligibility is your age. Banks will most likely grant you a home loan if you are young. This is because they look for borrowers who can repay the loan amount satisfactorily before the retirement age, which is generally 60 years.
Meanwhile, while going for a home loan, you cannot go with any organization as there are certain factors, such as Interest Rate, Processing charges etc., to keep in mind. This is because you deserve the best! Some of these factors are –
The interest rate is factored into the EMI along with the principal amount. It is charged on a reducing balance basis, which means the remaining principal comes down with each monthly payment.
There are application processing charges and expenses incurred by the banks on assessing property value and verifying other details mentioned by the borrower. Keep in mind that you can also negotiate these charges with your lender.
Maximum Loan Amount
This is governed by two attributes: property value and income level. Financial institutions usually fund around 70-75% of the property’s value; some can go up to 80%.
So when you have cleared all the checkpoints for home loan eligibility, make sure you pick the best one. I recently went for a home loan via the Bajaj Finserv application. Never thought going for home loans would be so easy. Highly recommended!