Buying a home requires planning, and Home Loans appear as financial support. But it is important to know whether you are eligible for a Home Loan. You may have heard about different types of Home Loans available in the market, but each type has specific criteria.
We will discuss six key factors that can decide an individual’s eligibility to opt for a Home Loan in India. And look at the documents required to prove Home Loan eligibility. So read on if you want to make intelligent decisions about your housing finance!
Eligibility for a Home Loan – Deciding Factors
When an individual applies for a Home Loan in India, the lending institution considers multiple factors in assessing their credibility. These factors help them identify whether an applicant is eligible for the loan. The six key factors include:
Your Age
Age is one of the most critical factors determining your Home Loan eligibility in India. The maximum age limit for getting a Home Loan from any financial institution in India is 60 years. In comparison, self-employed people can apply for a Home Loan up to 65.
Employment status:
Your employment status is essential when determining Home Loan eligibility in India. Home Loans are generally offered to individuals with a steady source of income, as lenders need assurance that the borrower will be able to repay the loan amount. If employed with a company, you need to provide documents like salary slips and bank statements proving your income.
On the other hand, if you are self-employed, you must submit documents like income tax returns, balance sheets, and profit & loss accounts to prove your financials.
Your credit behaviour and scores:
When applying for a Home Loan or Home Loan transfer process in India, an applicant’s credit repayment behaviour and credit scores are essential factors that lenders consider. Banks want to know if the applicant has managed their finances responsibly or not.
A good credit score is an indicator of one’s financial discipline and thus helps banks determine whether the applicant is eligible for a loan. The credit score is essential in determining eligibility as it shows an individual’s credibility if they can repay their debts and loans on time.
Your income-to-expense ratio:
When it comes to Home Loans, one of the most important factors lenders consider is your income-to-expense ratio. This ratio measures how much your monthly income is spent on essential expenses such as rent and other bills.
To be eligible for a Home Loan, you must have enough money left each month after paying your bills to repay your loan. Therefore, your lender will assess your income and expenses to determine how much you can afford to borrow.
The type of property you are buying and its value:
One of the critical factors determining your Home Loan or Home Loan transfer eligibility is the type of property you are buying. Generally, lenders consider residential properties more favourably than commercial ones. The property’s value is also essential as lenders prefer to lend a maximum percentage of the property value, usually up to 75% or 80%.
These are the six primary factors that influence Home Loan eligibility in India. Additionally, applicants should consider the interest rate and prepayment charges when choosing a lender.
Read a similar blog: The Benefits of Taking Out a Home Loan with a Woman as the Primary Borrower
While applying for a Home Loan in India, submit the following documents:
1. Proof of Identity: This includes your passport, Aadhaar card, PAN Card, or any other valid identity document.
2. Proof of Residence: This includes documents such as a recent utility bill, voter ID card, or Aadhaar card.
3. Proof of Income: Salaried applicants must provide their salary slips, IT returns, and other income documents. On the other hand, self-employed applicants must submit a profit & loss statement, audited balance sheet, and tax returns.
Conclusion
Determining Home Loan eligibility is relatively easy if you have all the documents and information required. Just check your credit score before applying for a loan, as this will give you an idea of how much loan amount lenders are willing to offer.
