Nobody likes paying a hefty amount of rent each month from their hard-earned income. The idea of paying the EMI (Equated Monthly Instalment) of a home loan sounds way better as, ultimately, the property will be yours once it ends. Due to our country’s rising real estate prices, many individuals opt for home loans.
But, sadly, it’s not something you can easily avail as a housing loan eligibility is checked first, following which you get the loan. Remember, while this loan can help you make your dream come true and protect you from going ‘All in’, there are certain factors that you need to keep in mind that affect it.
What is a housing loan?
A housing loan is a credit facility provided by the banks and NBFCs (Non-Banking Financial Companies) to those planning to buy a house or land, build a home on their land, or renovate their current residence and maintenance needs.
Each month, a portion of the principal amount, along with interest, is paid through EMIs (Equated Monthly Installments). It is pertinent to mention that both the interest and principal components qualify for a tax deduction. Also, one gains complete ownership of the property after the end of the loan tenure.
What is housing loan eligibility?
It is the set of qualifications that a borrower must meet in order to avail a home loan from a bank or a financial institution. Here, these officials assess whether the borrower is creditworthy or not to avail and repay the loan amount. It is essential to know that the top two factors that play a very significant role here are income and repayment capacity of the borrower. However, other factors are also there, such as age, current financial position, credit history, credit score etc.
What are the elements to qualify for a housing loan eligibility?
- Fair income
A fair income every month increases your chances of eligibility. As we all know, there is no collateral while going for a home loan. Due to this, financial institutions want to know that you have a decent income every month from your profession and other sources that allow monthly payments. This increases your credibility and creates a trust factor. So, the more the salary, the more the chances of getting the loan approved.
- Young Age
Another element which you might haven’t thought about is your age. Remember, the young years are the best time to go for a loan as they increase the chances of housing loan eligibility. This is because lenders look for borrowers who can repay the loan amount easily and efficiently before the retirement age, which in India is generally 60 years. So, depending on your eligibility amount and loan period, age plays an important role.
- Good credit history
Worthy credit history is a powerful element; it can become a hurdle if you don’t have it. In simple terms, if you don’t have a credit history, the lender from which you are planning to avail the loan will have no reference point to use while analyzing your credit conduct.
- Don’t switch your job
Frequent switching of jobs impacts the eligibility amount. See, if you are salaried and planning to go for a home loan, then try to at least continuously work for two years in a company. Your planning should be such that you can show your lender your two years of continuous service in an organization.
- Clear your debt obligations
The debt-to-income ratio is a critical point for a lender to evaluate the eligibility of a home loan applicant. So, if you are an applicant for a home loan, ensure that you clear all your loan obligations which ultimately increases your housing loan eligibility.