Buying a home is a big financial decision. Though many people save for it, arranging all the money in one go can be challenging, especially if you factor in today’s skyrocketing property prices. In that regard, applying for a Home Loan is a smart move. Do you know that a Home Loan has the longest repayment tenure, lasting as long as 30 years?
However, having the longest repayment tenure, lenders ensure you meet all the Home Loan eligibility criteria to reduce the credit risk. They check several parameters which can affect your eligibility for the Loan:
- Age
While applying for a Home Loan, a lender checks your age to ascertain how many years are left until your retirement age. Therefore, if you avail yourself of it two or three decades before retirement age, the chances of securing favourable terms on your Loan are greater. But if you apply for a Home Loan with only 10 years left until your retirement, it may become difficult to secure the Loan, and you may be asked to meet more stringent eligibility criteria.
- Credit scores
A healthy credit score is important in determining your Housing Loan eligibility. It helps lenders weigh your creditworthiness and the chances of repaying the Loan on time. To get swift approval, one must have a minimum credit score of 700 and meet other eligibility criteria. The higher your CIBIL score, the better your chances of the lender approving a Loan application at favourable terms.
They widely consider the credit score offered by CIBIL. If your credit score is low, it is advisable to work on improving it before applying for a Home Loan.
- Existing debt obligations
The ideal debt-to-income ratio (percentage of income goes towards debt servicing) is 30% or lower if you want to get approval for a Home Loan at excellent terms. Ensure the combined EMI (including Home Loans) does not cross the 30% threshold. You may also use the Home Loan eligibility calculator to compute the maximum amount you can get as a Loan depending on your disposable income.
If you require a higher amount, you need to settle existing debts and add a family member with a good credit score and income as a co-applicant for the Loan.
- Employment status
The applicant’s employment status is crucial in determining their Home Loan eligibility. Suppose you are employed at a reputed private or public sector enterprise. Then, the chances of securing the Loan are high because you are considered a reliable borrower with a stable income source.
Conclusion
Other factors that impact your eligibility for a Housing Loan include your income, downpayment, and the number of dependents in your family. Ensure you can manage all expenses without straining your finances, and remember to follow these tips to enhance your eligibility.
