Factors Proving Eligibility of the Buyer to Avail Home Loan

Housing is one of the basic necessities of the human today so to buy a perfect house the buyer may need to avail funds from banks or financial institution as it’s not necessary that buyers may always have sufficient funds. So the eligibility of the home loan borrower is based on various criteria which further prove the whether the borrower is capable enough to get the funds or not. One needs to ensure that the conditions are right for the home loan application to go through smoothly. Factors affecting home loan eligibility should be understood by the borrower and kept in mind before making any applications. If the buyer has finalised a house and is planning to apply for a home loan, here are some insights on the parameters banks use to judge home loan applications.

The following factors can become an obstacle if not taken care of on time.

Employment structure
Bank put a lot of emphasis on the employment structure of the borrower among salaried employees banks give certain sectors consideration as stable and less risky and banks have an internal chart which indicates the loan eligibility for various sectors. So if the borrower significantly belongs to an industry which does not have a good history and has lots of uncertainties than the bank may reduce the eligibility of such a person. It differs from bank to bank and hence it cannot be listed. So the person should not be amazed if he does not get the same amount of loan as much as other person having the same income gets.
 
Salary composition
It’s great for the employee where he gets lots of incentives when compared to in-hand salary as it gives lots of benefits in the form of income-tax perspective but it may not help the person in getting the amount of loan which he desires of getting as bank cannot decide the repayment ability of the person on basis of allowances. As the allowances in a particular month may not be equivalent to the allowances in another month. So if the basic salary of the person is low it becomes difficult to get the loan as a borrower is not allowed to explain that adding all such allowances makes his income a sizeable amount. So it’s always advisable to have a good amount of basic salary rather too many allowances.
 
Source of income
Different banks have different eligibility criteria. If the person earns income from salary then banks give first priority to such salaried person as compared to a self-employed person as the salaried person has much stable income when compared to a self-employed person. If the person keeps changing his job constantly then there are chances that bank may not grant buyer a higher loan amount as they feel insecure in case of layoffs. If the job is being stable for at least 2-3 years than the bank may consider granting higher loan amount. If the salaried person gets 35 percent of the annual income as loan then, the proportion for a self-employed person would be 25 percent.
 
Credit score
A credit score is perhaps the most important aspect of getting the home loan as banks will check one's credit ratings on CIBIL and assess their repayment habits. A credit score is a score assigned to the person on the basis of his credit history. Factors which affect credit score are Regularity in repaying loans, credit behavior and type of credit taken are some of the factors to name a few. If the person has never taken a loan before or defaulted on any credit than his chances are pretty good to get the loan compared to a person with bad credit history.
 
Age and working years left
Age plays an important role while deciding the tenure of a loan and it directly co-relates to the eligibility of the borrower for the loan. Banks usually try to restrict the tenure of the loan to a person’s retirement age as its better if the person payoffs the loan before retirement. If the age of a person is around 30 years, then the maximum tenure a bank can offer is around 20-25 years depending on the loan amount. If the retirement is supposed to be closer than the loan tenure may be compressed and so would the people’s eligibility. Younger people easily tend to get the loan as they have number of years to pay off the loan usually person needs to have 10-15 years on their side before the retirement approaches.
 
Hence, this article clearly lays down the idea of what home loan eligibility is and how it is affected by different factors in person’s profile. Home loan eligibility is calculated differently by each lender which is why one qualifies for different loan amounts from each lender. Therefore it is a good idea to start working on improving the eligibility from today itself.