For a lot of people, the single thing that stands between them and their dream home would be home loan eligibility. Lenders will conduct assessments to see if your profile matches their eligibility criteria and will make a decision based on that. But what are the factors that influence your home loan eligibility? Let’s take a look.
- Your credit score
Your credit profile and score have a lot of influence on your housing loan eligibility. Your credit profile shows your credit and repayment history. Lenders will look at that to gauge the risk associated with lending your money. Your credit profile will have the complete history of your loans; repayment, missed EMI payments and a lot of debt can adversely affect your credit score, thereby reducing your chance for home loan approval. The credit score eligibility criteria and risk threshold may be different for different lenders but in general, a credit score of above 750 is considered ideal. If your credit score is lower than that, you could be offered a higher home loan interest rate even If your loan is approved. Therefore, the wise thing to do is to apply for a home loan where the credit score is more than 750. If your score is lower, it’s ideal if you work on improving that before applying.
- Your current debts and obligations
When a lender assesses your eligibility for a home loan, they mostly look into your repayment capacity. One thing that affects your repayment capacity is your current debt and obligations. If you have a lot of monthly EMIs to repay, you might not be able to pay your loan EMI back. Hence, higher debt and liabilities negatively affect your loan approval chances. Similar to how a low credit score can affect home loan eligibility, your debts needs to be taken care of to avoid lowering your eligibility chances. So, make sure to repay your current debts before you take on more.
- Your income
Another thing that indicates your repayment capacity is your income. You should have an income with which you can comfortably pay back the loan EMIs. Lenders will use assessment techniques to see if your income is adequate for them to give you the loan. If your income is lesser now, it’s better to wait until it increases before you apply.
- Your property
Your property is the security on which lenders are giving you a loan here and hence, its value and tradability matter to the lender. If your home is in a city where the demand for real estate is higher, your chances for approval are higher and you might even get a higher loan amount.
Following the above pointers will help you make sure you are eligible for a home loan. It is important to make sure you are eligible before you apply for a home loan, not only for the lender’s sake but for you to avoid a debt trap as well.