ACQUIRING a home loan can be an arduous task as each lender has its own criteria for evaluating a loan application. Here are a few factors that almost all lenders consider.
Your disposable income is one of the most important parameters for vetting your home loan application. It is derived by deducting your statutory deductions, monthly expenses and existing EMIs from your gross income. A lender will expect your loan EMI to be within 40% of your monthly disposable income. However, some lenders consider your gross income for judging your home loan. If your disposable income is comparatively low and you wish to opt for a higher loan amount, you may consider adding working members of your family, like your spouse or children, as co-applicants.
Lenders judge your creditworthiness through your credit score. A low credit score may reduce the chance of getting a home loan or can lead to a higher interest rate. Don’t apply for loans with too many lenders within a short period as it can pull down your credit score. CIBIL classifies a credit score of over 770 as a good credit score. However, other credit bureaus may have different scoring patterns and yardsticks for a ‘good credit score’.
Compliance with legal norms
Lenders verify details of the property for which you are taking the loan. They provide loans to house properties that have been cleared by local authorities and have clear and valid title. Some banks offer special loan packages on properties listed in their database of approved projects. Properties in their database are considered reliable as they do the due diligence of the projects themselves.
Occupation stability and continuity
Lenders prefer to give home loans to people with a stable job or income source. They also consider how long you have been working with your present employer. Switching too many jobs during your career may create a negative impression. Government and PSU employees are the most preferred ones followed by doctors, chartered accounts and employees of top private-sector companies.
Age of the applicant
Your age plays a major role during the approval process of the home loan. Although home loans carry maximum tenure of 30 years, banks prefer borrowers to finish repayment by the time they are 60–70 years of age. Thus, people in the 25–45 age groups are preferred as they have more than 20 years of their working life to pay off their home loans.
Generally, public sector banks are the most stringent when it comes to loan approval process. However, their Property Loan Interest Rate is also the lowest. The reverse is true for housing finance companies and other NBFCs. Approach the NBFCs if bigger banks refuse to finance your home purchase. You can transfer your home loan later. While most of the factors that banks consider have to do with you, the legality of your house property is something that is beyond your control.
Thus, always ensure that the property has all the required clearances before making the final decision.