Factors That Decide Whether You Get A Home Loan Or Not: Most peoples apply for a home loan while buying a home. Banks and financial institutions sanction home loans according to the certain terms and conditions. Lenders evaluate home loan applications according to the very harsh norms. Apart from the parameters according to which banks and financial institution evaluate the loan application, there are certain factors that influence your prospects of getting a home loan for your desired home.
Home Loan Availability Factors
1) Your Credit Score:
The most common reason for the rejection of a home loan application is a bad credit score or bad credit history. As a first step towards processing any credit facility, banks or other financial institutions will obtain your credit score and credit report from any credit information bureau, like CIBIL. If you have defaulted in the repayment of your credit card bill or any other loan, the default is reported by the lender to such credit information bureaus.
A credit score is assigned based on your credit history. Your credit score and payment history gives the lender a picture of how you handled your liabilities in the past, and how capable you are of repaying your loan. Banks and other financial institutions decide whether to sanction your home loan based on your credit score.
2) Your Income:
The income does not require any further explanation. If you have higher income, it influences the banks and financial institutions to lend you. Higher your income, greater the amount of loan banks are willing to lend you. All banks and financial institutions insist that applicants should have a certain level of income to be eligible for a home loan. This, of course, varies according to your profession. Your home loan eligibility is calculated based on your income.
3) Your Age:
Your home loan eligibility is evaluated for a certain period which is called tenure. Your loan tenure is based on your age, and your ability to pay it off in a certain period. The ability of a young applicant to pay back his loan will be different from the ability of a middle-aged or retired person. Banks or other financial institutions generally do not grant home loans to the salaried individuals who have retired and to the self-employed people who have completed 65 years of age, even if adequate security is provided by these applicants, in the form of other immovable property. The reason behind this is that the lender is interested in getting his home loan serviced each month and is not so interested in the value of the property that is mortgaged. So, if you are a retired person or older than 65 years, you will not be able to get a home loan.
4) Your Qualification and Working Experience:
If your academic credentials and work experience are impressive, the possibility of the bank sanctioning your home loan is higher. Banks or other financial institutions generally are not willing to give home loans to those people who have not completed a certain minimum number of years in employment or in business. For example, if you are a salaried employee, you must have at least two to three years of work experience to be eligible for a home loan. Similarly, if you are a self-employed individual, your company must have been operational for at least two or three years, with sufficient cash profits and revenues. Tax returns must have also been filed in the company’s name. Lenders do so, to satisfy themselves about the consistency and quantum of the applicant’s income flow. Your academic credentials and work experience predict career progress and stability fairly well.
5) Type of Your Employment:
The type of your employment will affect your home loan eligibility. Banks care about whether you are salaried, or whether you are a Self-Employed Professional (SEP) or a Self-Employed Non-Professional (SENP). Various Banks or financial institutions offer some home loans products, especially for the specific segment. The eligibility criteria vary according to your form of employment. Frequent job changes can affect your prospects of getting a home loan.
6) Number of Dependents:
The number of dependents you have in your home loan application will affect your home loan eligibility. If you have a large number of dependents, you have lower chances of your home loan being sanctioned, all other things are the same. In fact, your income should be sufficient to support your dependents, and take on the extra burden of a paying off a home loan at the same time. Lenders compute the Fixed-Obligation-to-Income Ratio (FOIR), which eliminates a part of your income used to support your family member or your dependents.
7) Market Lending Rates:
The Reserve Bank of India (RBI) has some policies and market lending/interest rates that have a huge impact on your debt and advances. Interest rates determine the cost of borrowing money. Higher the interest rate, higher will be the cost of your home loan. In simple terms, rising lending rates will raise inflation and discourage borrowing, making savings more attractive. Declining interest rates make borrowing more attractive.