Home is one of the closest to heart, if not ‘the closest to heart’ dream for many people. And this cherishable dream is often fulfilled by availing a home loan. However, the most important aspect of availing a home loan is understanding as to how much loan you are eligible for. In the recent past, the popularity of home loans has only increased, and so has the acceptance of lenders other than banks. As per reports, the home credit went up by 15% for Housing Finance Corporations, and it suggested similar growth in 2020.
The increased popularity means more people would be opting for a home loan. However, the most crucial aspect of successfully getting the home loan is knowing the home loan eligibility criteria and making sure you are acing all of them. Failing to meet the home loan eligibility criteria will cause your application to be rejected and will also bring down your credit score. Following are 5 aspects that affect your home loan eligibility:
Credit Score: A credit score is a three-digit numerical expression of your credit history and your creditworthiness. The score ranges from 300 to 900. The score is calculated by various credit rating bureaus such as CIBIL, Experian, etc. The credit score is calculated based on a variety of factors such as consistency of paying monthly dues, a variety of credit availed, total outstanding balance, etc. Banks and financial institutions provide the data to calculate the score to these credit bureaus from time to time.
A score of 700 or above is considered to be a good score and can easily satisfy this home loan eligibility criteria.
Age: Since the tenure of a home loan is long, the age of the borrower is another significant factor. The minimum age to apply for a home loan is 18, while the maximum is 70 years. Most banks offer up to 30 years of tenure, while most financial institutions offer up to 20 years of tenure on home loans. It is to be noted that the maximum age means the age till which the home loan should be completely paid off. Thus, the younger an applicant, the higher will be the tenure available.
Property Type: The type of property for which you are availing the home loan also matters. No doubt, the property has to be residential, but apart from that, there are still various aspects other than that. For example, the property should not be disputed; it should not be a gram panchayat approved property, the builder of the property should have adequate permissions regarding the property, etc. All these various other aspects should also be considered before selecting the property and applying for a home loan.
FOIR: The FIxed Obligation to Income Ratio is another crucial home loan eligibility criteria. It is calculated as the ratio of all the existing fixed expenses to your net income. So, if your FOIR is 50%, then it indicates 50% of your spending on fixed monthly obligations, which includes rent, existing EMIs, living expenses, etc.
A maximum of 65% of FOIR is accepted by the lenders. A FOIR below 50% indicates that you have ample income to pay the EMIs of your home loan. Thus, the lower the FOIR, the better.
Down Payment: As per RBI, lenders are not allowed to finance more than 90% of the property’s value. Thus, a minimum of 10% of the property’s value has to be self-financed, which is called down payment. The more you can contribute to your down payment, the lower will be your loan amount.
You can also make home loan comparison of various lenders on any loan aggregator platforms, as they provide such features on their website for free. Here you can select multiple lenders and compare their rate of interest, fees, FOIR, tenure, etc.