Buying a home and that too on a Home Loan has to be the biggest or the ‘lifetime decision’ of your life! Thus, it becomes for a borrower to calculate home eligibility not only to qualify for a Home Loan but get it at a lower Home Loan interest rate. Yes, no matter how well settled you are in life or having consistent employment, you need to calculate home eligibility before approaching a lender to get a good deal.
For that, you can utilise a Home Loan eligibility calculator to know how much amount you can avail as loan. In the same context, let’s provide you some factors on which your Home Loan eligibility gets determined!
Deciding Factors for a Borrower’s Home Loan Eligibility
Your lender will always look into following parameters before approving a Home Loan. Some of the vital factors are:
Your Employment Consistency
Unless you are salaried and have at least 3 years of experience or at least five years of business vintage in case of self-employment, the loan won’t get processed.
The younger the applicant, the more chances of getting loan approval. Yes, most lenders will only give to individuals who are younger and have more earning years left.
Having a good Credit Score will easily increase the chances of getting a loan approval at a lower Home Loan interest rate. Having a consistent repayment history of existing loans and credit card outstanding will help you improve your CIBIL Score.
Sometimes working with an employer of repute may help you get a Home Loan approval even if you don’t meet other eligibility conditions fully. Yes, that’s true! Also, the reverse is true when you met other terms, but are not working with a good employer.
To determine this factor, not only the existing status is taken into account, even the past history holds the key to assessing the Home Loan eligibility. If you have had a healthy financial record, it can decide your loan amount, tenor and interest rate at the time of applying for the loan.
Here’s How Banks and other Lenders Compute Home Loan Eligibility
Generally, banks and other lenders follow some steps while they calculate your Home Loan eligibility. However, the steps may vary as per your lenders:
Step 1: Lenders will assess your salary slips and bank statements to know about your income level.
Step 2: It will then compute the amount that you save. Lenders take 30% of your income as savings. If your salary is Rs.30,000, your saving ought to be Rs.9,000.
Step 3: If you are paying some existing loan EMIs, those will get deducted from your income.
Step 4: Lenders also do a backward calculation to know how much Home Loan amount you can afford as per the assessed saving amount.
Tips to Enhance your Home Loan Eligibility
If you are short of a Home Loan eligibility as you can decide by using a Home Loan eligibility calculator, you can still improve it by following some smart steps:
- Don’t delay your payments: Ensure to pay all dues on time to improve your Credit Score and loan eligibility
- Keep sufficient bank balance: Showcase your financial health by keeping your bank account healthy with cash
- Don’t utilize the maximum limit of a credit card: Ensure never to use a credit card’s entire limit and derail your chances of loan approval. Having too many EMIs on sleeves may let your employer assume you can’t repay extra EMIs
The Bottom Line
Now that you are aware of the various insights of a Home Loan eligibility, you can calculate loan eligibility easily using a Home Loan eligibility calculator and be loan ready! All the best!