The housing finance credit market in India may see a 17-19% rise in FY19-20, as per an ICRA report. This data suggests that an increasing number of Indians are availing home loan facilities to fund their new homes.
Home loans help an individual own a house with credit from financial institutions. Potential home-owners thus do not have to worry about rising property prices or a reduction in savings while financing their houses.
Individuals have to maintain certain home loan eligibility criteria to enjoy the benefits of housing finance.
What is home loan eligibility?
Home loan eligibility refers to the rules and regulations set by housing finance companies to determine which individuals qualify for a home loan. These eligibility criteria make sure that home loan applicants are financially capable of repaying the housing credit in due time.
Home loan eligibility criteria differ for various financial institutions so as to extend home loans to individuals from different backgrounds. There are a few common factors that shape most housing finance institutions.
Factors affecting home loan eligibility
Home loan eligibility for availing housing credit benefits vary from one lender to another. However, the following are the usual factors that determine the eligibility criteria of a potential home-owner-
Age of the applicant
Applicants belonging to a specified age group are eligible for home loans. Individuals can enjoy longer tenors and lower interest rates when they apply at a younger age for such credits.
Taking housing credit at an older age burdens the applicants with shorter tenors and substantially high-interest rates.
Employment background
Salaried and self-employed individuals with a regular monthly income receive home loans easily due to their capability to repay the loan in time. Keep in mind that you must provide ample evidence regarding your income, in the form of bank statements and salary slips.
Credit score
Lenders prefer individuals with higher credit scores while disbursing housing credit. A consistent credit history suggests the creditworthiness of the applicant.
Property value
The value of the property is one of the factors that affect home loan interest rate and eligibility.
Individuals can use a home loan eligibility calculator online to check whether they qualify for a home loan.
Steps to improve home loan eligibility
Applicants can consider the following options to improve their home loan eligibility –
Additional income source
Individuals can diversify their income portfolio by adding income from rents and part-time businesses. An applicant can apply for higher home loan amounts by adding an income source to the existing one.
Higher CIBIL score
Individuals, having a CIBIL score of 750 and higher find it easy to avail home loans from housing finance companies. Lenders depend on higher credit scores while choosing their customers to ensure a timely repayment.
Joint application
Having a co-applicant for a home loan helps an individual improve eligibility. Lenders are assured of loan repayment in the presence of a co-applicant, as the repayment burden is divided between two earning individuals.
Clearance of existing loans
Applicants should repay their existing loan amounts before taking a home loan. Financial institutions approve home loans for individuals whose previous debts are cleared. Thus, a lower FOIR (Fixed Obligation to Income Ratio) increases the home loan eligibility of an individual.
Furthermore, Individuals should keep the necessary documents readily available for enhanced eligibility.
Documents for a home loan
1) The documents required for a home loan are –
2) KYC documents- Aadhaar Card, Voter ID, PAN Card.
3) Address proof- Above documents as well as utility bills.
4) Income proof- Form 16, salary slips, bank statements of the last 6 months.
Eligible applicants can avail a home loan at beneficial terms other than affordable interest rates. Still, it is better to limit the principal amount to only as much as you need. Otherwise, your repayment burden will increase significantly.
Home loan eligibility criteria can be improved by following the above-mentioned options for conventional home loans. When you meet all the requirements, you can repay debts more conveniently.
Also Read: 5 Things Which Are Considered to Determine Your Home Loan Eligibility