The interest rates on home loans have touched new heights in recent years. Despite the hike, their attractiveness remains strong. To apply for a loan or a mortgage, you must know the factors that make you eligible. Your income, savings history, credit score, and age determine your housing loan eligibility.
Lenders are especially keen on reviewing the applicant’s profile before they disburse the loan amount. You can also use a housing loan eligibility calculator to get the most accurate loan estimate to borrow from a reputed financial institution like ICICI Bank.
Find out more about the factors that decide your entitlement to a housing loan in India.
Factors That Influence Your Housing Loan Eligibility
Housing loans are available for massive sums and have lengthy payback terms. Hence, banks generally keep high eligibility standards for sanctioning a home loan. They will carefully analyse factors while reviewing your home loan application’s status. Attention to the following parameters is critical if you need such a loan.
Credit Score
A credit score is critical in determining your home loan authorisation. It is a three-digit number that consolidates a person’s financial profile, including their monthly income, liabilities, repayment record and debt obligations.
The RBI has approved four credit bureaus that issue credit ratings and reports. They are in a network with credit card companies, banking institutions, and other lenders and manage records of every credit-related financial transaction. These credit rating firms have all the data on your credit transactions from the lenders.
A score of 725 or more is ideal for good home loan terms. A credit score of 800 or more can get you home loans starting at 6.65% per annum. Usually, people with a good record of making total payments timely have a high credit score.
A Stable Income
A stable monthly income is another critical parameter of home loan eligibility. Applicants with a steady income stream are considered low-risk borrowers, and it demonstrates your ability to repay the total loan amount on time.
Cities like Delhi and Mumbai generally have strict stipulations on income and loan eligibility compared to Hyderabad or Gurugram. Individuals with a monthly salary between Rs 30,000 to Rs 35,000 can avail of up to Rs 5 crores as a loan amount for a 25-to-30-year period.
Salaried individuals with at least three years of working experience in a registered practice can get a home loan at low-interest rates. Besides, you can enhance your eligibility by including the co-applicant’s income on the loan.
Your Employment Status
Employment status is equally important, and so is your income in determining your loan eligibility. Individuals employed in an MNC or a public or private sector company have more chances of getting their loan application approved.
It doesn’t mean that self-employed individuals are in a disadvantageous position. If your business is stable, the lender will have no issues extending a home loan with flexible repayment terms. In contrast, if your experience reflects you are changing jobs often and not getting predictable income, the lender will consider you in a higher risk category.
Your Age
Your age also influences your housing loan eligibility. The lender or the bank usually ascertains the repayment structure on the time you have in hand as a professional individual. It goes without saying that if you decide to take a home loan before retiring, the sanction process will be a lot smoother.
Older applicants generally need help to avail themselves of loans at low-interest rates. The maximum age for seeking this loan is 62, considered when the loan matures. The rates of interest are not favourable for borrowers above 55 years. Lenders view them as a higher-risk category and are subject to stricter lending norms.
You can still increase your likelihood of getting a home loan if you are older. Ensure you have sufficient assets, a healthy savings history, and a decent credit score.
Your Property Profile
Another criterion for home loan eligibility is the house you have selected. Lenders carefully evaluate the quality of your property. They look at factors like the property’s condition, centrally or remotely located, whether its value will increase over time or decrease, features, and market value. These details let them determine if they can lend you the loan to purchase the property.
Many banks approve loans for properties by real estate companies that are their partners. The lender can do an independent appraisal if the house isn’t brand new. They can then lend you a part of the purchase to avoid the likelihood of a future structural collapse.
What Else Should Applicants Know About Getting Home Loans
Besides the above factors, applicants must consider the home loan processing fee. It is a one-time fee that lenders charge for processing your loan application. You pay it only after the approval of your application. Also known as an administrative fee, it is a tiny percentage of the home loan amount.
Processing fee generally amounts to around 0.5% of the loan sum plus GST in India. You must research well and choose the right bank or lender for a lower fee. Sometimes, lenders also waive the processing fee, so checking in with your specific lender about such offers makes sense before going in with your loan application.
Conclusion
A home loan is undoubtedly one of the most important financial commitments that you will make. Taking steps to maximise your chances of availing loans on good terms is essential. You can help yourself with affordable home loans online at attractive interest rates for up to 30 years with an ICICI Bank Home Loan. The quick digital application and loan approval process creates a hassle-free loan-seeking experience.
