What is Home Loan Eligibility?
Home loan eligibility is defined as a set of criteria basis which a financial institution assesses the creditworthiness of a customer to avail and repay a particular loan amount. Home loan eligibility depends on criteria such as age, financial position, credit history, credit score, other financial obligations, etc. Anyone-whether self-employed or salaried individuals/professionals with a regular source of income can apply for home loans.
HOME LOAN ELIGIBILITY CRITERIA
1. Present age and remaining working years: The age of the applicant plays a major role in determining home loan eligibility. The maximum tenure of a home loan is 30 years.
- The age limit for salaried individuals is 21 to 65 years.
- The age limit for self-employed individuals is 21 to 65 years.
- Minimum salary: 10000 p.m.
- Minimum business income: 2 lac p.a.
- Maximum loan term: 30 years.
- Financial position: The present and future income of the applicant plays a huge role in deciding the loan amount.
- Past and present credit history and credit score: A clean repayment record is considered positive.
- Other financial obligations: Existing liabilities such as a car loan, credit card debt, etc.
How to enhance home loan eligibility?
As we all know home prices are skyrocketing. One may need a bigger home loan. If you want to develop sound borrowing power then below are mentioned few tips to enhance your home loan eligibility:-
1. Look for extended home loan tenure:- This may not be a smart move for one’s eligibility. The shorter the loan tenure, the higher will be your EMI. It will ultimately require a higher repayment capacity.
2. To make a higher down payment:- By solely increasing the amount of down payment you can save a good amount of money. Bank can generally help finance a home loan to approximately 75-90% of the property value. However, you may have to bear the cost of the balance amount. The lower the down payment, the higher will be your loan value and therefore, the higher the payable interest.
3. Clear off all existing loans:- If you are already burdened with an earlier borrowing and may sanction a lower loan amount. The lender may hesitate to provide you higher loan amount because of pre-existing loans.
4. Taking a joint loan with your spouse:- Opting for a joint loan will not only enhance your eligibility but you can also avail a higher loan amount.
5. Ensure you have an improved credit score:- The home loan eligibility criteria are based on the borrower’s credit score. Typically you would need a credit score of 750 to become eligible for the home mortgage. If it is lower than 750. In that case, you may want to work on improving it by clearing off existing loans and maintaining a credit utilization ratio of only 30% of your spending limit against your credit card.
6. Expose additional income:- It can help to raise your home loan power further. Any income that you receive from your side income or any investment such as mutual fund dividend, fixed deposit, rental income from another property. Apart from your monthly income, your additional income can definitely uplift your home loan eligibility.
To conclude, When you take the above-mentioned steps to improve your chances of qualifying for a home loan, you can quickly become eligible for a higher loan amount, extended tenure, and better terms and conditions. Begin the process by improving your credit scores and fixing any errors if needed. Continue to lower your debt to income-ratio and save actively for your down payment to buy the home of your dreams.