For almost all Indian families, owning a home is a dream. The best way to make your property dreams come true is by applying for a home loan to reduce your financial burden. Read on to know more about the factors that will impact your home loan eligibility to make the process more comfortable and hassle-free.
Your CIBIL or credit score helps banks and other financial organisations assess your creditworthiness. It gives them an idea of how efficient you are in paying back credits. This numerical value ranges anywhere between 300 to 900 and needs to ideally be more than 750 to increase your chances of getting a home loan approved.
What is a good CIBIL score?
A CIBIL score can fall under one of the below categories:
Excellent Credit: 760+
Good Credit: 700+
Fair Credit: 640+
There are many ways to improve a weak CIBIL score. To begin with, make sure you pay your outstanding credits on time and do not take up any unsecured loans.
Your qualification and work experience play a key role in increasing your chances of getting a home loan approved. Banks and other financial organisations do a thorough background check on your work profile while checking eligibility. Few of the factors that are focused on include:
The type of employment: Each form of jobs has a different set of criteria to get approved for a home loan. For example, a salaried individual has higher eligibility than a self-employed professional due to the periodic pattern of fixed income. Additionally, professionals who work in traditional sectors like corporate, finance and government bodies are more likely to get approval than individuals who are freelancers or work in the media industry.
Work experience: The number of years you have as work experience also plays a vital role in increasing your eligibility. Make sure you have at least three years of professional experience in your field of work. Furthermore, avoid too many career switches or job changes. The longer you work with one employer, the higher your chances of getting your home loan approved.
Tax filing: Regular tax filing is a fool-proof way to get one step closer to your home loan approval. Whether you are a salaried professional or a self-employed individual, make sure you have a clean tax slate to increase your eligibility.
Age of the applicant
The age of the applicant has a direct impact on the tenure of the loan. Younger professionals have a better ability to pay the loan back when compared to older applicants, giving them an added edge to getting their loan approved. Banks also take into account the various lifestyle challenges applicants are susceptible to in different stages of their lives and take a call accordingly. Keeping all these factors in mind, applying for a home loan in your younger years is the best bet for potential home buyers.
Income of the applicant
Your income plays a huge role in determining your pattern of paying back the credit. A lot of banks and financial organisations have a minimum level of income to be documented by the applicant to apply for a loan, which varies as per your field of work. The eligibility is then calculated based on the FOIR (Fixed Obligation to Income Ratio) which gives the lender an idea of how much of your income is spent to support your family members and how much is left to pay back your home loan.
Number of dependents
Since your income plays a significant impact on your home loan eligibility, it is important to consider where most of your money is spent – which is your family. The higher the number of dependents you have, the lower your chances of getting an approval, unless your income is high enough to be able to support your family and pay off the home loan.
However, if your spouse is also a taxpayer like you, you can increase your home loan eligibility since the lender takes both your income into consideration. Additionally, you can also buy the property in your wife’s name and enjoy subsidized interest rates.
Number of active loans
Though your credit score helps banks with a better idea on your credibility as a borrower, it is also essential to make sure you do not have too many active loans while applying for a home loan. A high number of loans is indicative of a high appetite for debt which may not act in your favour during approval. Banks determine loan eligibility based on the DSCR (Debt Service Coverage Ratio) which is the difference between your property value and the total credit taken by you. Naturally, a lower credit will indicate a higher difference, improving your chances of getting an approval.
It is a known fact that home loans cover only 80% of the total property value which can be extended to 90% for properties priced under Rs. 30 lakh. Though a more significant down payment value does not directly affect your home loan eligibility, it provides the bonus of lower EMIs, which is always an added privilege.
Credibility of the builder
Banks and financial organisations always perform a background check on the property against which the loan is being taken. Few of the routine checks include factors like the age of the property, chances of structural damage in the near future and quality of construction. They also check the locality of the property to see if the neighbourhood has received a government clearance for development. In order to increase your chances of loan approval, it is a good idea to opt for a credible builder who has years of expertise and is known for their unmatched reputation and class. Lancor, for instance, is one of the most renowned real estate developers with a strong presence in Chennai.
Make sure you follow each of these tips to improve your credit score and get a hassle free home loan and speed up the process of buying a home. You can also check out our detailed blog on top tips to apply for a home loan for further insights. Whether you are a first time home buyer or a seasoned investor looking for properties in OMR or in other localities of Chennai, head out to Lancor today and find your dream home!