A home loan empowers you financially to buy your dream house without paying its price upfront. Features like flexible repayment, low interest rates, quick disbursal, minimal documentation requirements, and easy eligibility conditions make home loans more viable solutions than ever. However, it is crucial to calculate your loan eligibility before you settle over it. Doing that will maximize your chances of loan approval and save your credit score.
Below you will understand why it is vital to check home loan eligibility, what factors affect your eligibility, and how to calculate it.
Why Checking Home Loan Eligibility is So Important?
Checking home loan eligibility before applying is important to avoid rejection. Most NBFCs have simple eligibility criteria, – related to your age, income, employment, credit score, etc. If you miss any of the lender’s set requirements, they may reject your loan application or raise the interest rate. Loan rejection will not only waste your time and effort, but the hard enquiry induced by it will also affect your score negatively. That is why it is essential to check loan eligibility before filling out a loan application form.
How to Calculate Home Loan Eligibility
Browse through the lender’s website to find their eligibility conditions and ensure that you fulfil each of them. A salaried employee or self-employed individual can apply for a home loan, provided that they meet the lender’s minimum age, credit score, income, and other eligibility requirements. While evaluating your loan application, lenders also consider your nature of employment, work experience, repayment capacity, property value, and debt-to-income ratio.
Apart from eligibility conditions, also check the lender’s documentation requirements, based on which the lenders verify the information you provide in your loan application. Most lenders ask for your identity proof, address proof, income proof, and property-related documents. Based on your eligibility and documents, lenders decide your loan eligibility, loan amount, and loan interest rate.
Using a Home Loan Eligibility Calculator
A home loan eligibility calculator is a helpful tool that allows you to check home loan eligibility quickly online. You have to enter your monthly income, net monthly obligations, the property’s market value, interest rate, and loan tenure. Your maximum loan amount and monthly EMI amount will automatically appear on your screen. You can adjust the loan tenure according to the EMI amount you can afford each month. Increasing the loan term will make the EMI amount smaller, but decreasing the loan term will increase the EMI amount. Therefore, know your budget and calculate your repayment capacity before selecting your loan tenure.
Factors Affecting Home Loan Eligibility
Some factors that affect your home loan eligibility include the following:
Credit Score: Your credit score indicates your creditworthiness, which plays an essential role in determining your home loan eligibility. A high score reflects high repayment capacity and boosts your loan eligibility. Therefore, maintain a credit score higher than 700 to get a loan with low home loan interest rate and favourable terms and conditions.
Monthly Income: Lenders check your monthly income to decide the maximum loan amount you are eligible for. They want to ensure that you have a regular income with steady finances and higher income prospects in the future. Besides your regular income, don’t forget to mention all your additional income sources to improve your loan eligibility.
Age: Your loan amount and tenure largely depend on your age. Lenders prefer borrowers in their prime earning years rather than those in their early career or near their retirement age. Since the loan term may go up to the retirement age, they note your age before giving you loan approval.
Property’s Age and Condition: Your house loan eligibility will largely depend upon the age, condition, and value of the property you want to purchase. Most lenders do not offer loans for old buildings. So, if you are planning to buy a house on resale, the lender may refuse to lend you a high loan amount. Therefore, it reduces your loan eligibility.
Those planning to apply for a house loan must check loan eligibility before proceeding with the application. Depending on the lender’s eligibility criteria, fulfil their minimum requirements and provide the needed documents to improve your eligibility. Use a home loan eligibility calculator to know how much loan amount you are eligible for and what loan tenure would suit your repayment capacity.