Buying a house can sometimes be a difficult affair as it requires a lot of documentation and processing time. Banks approve home loans only to their customers who fit in their designated eligibility criteria. Each bank has their own policy terms by which the eligibility criteria to approve a home loan is decided. Know how banks decide whether you are eligible to get a home loan or not.
Your Income Criteria:
An income criterion is the main component of the eligibility criteria. Banks consider 40% to 60% of your monthly income to be utilized by you for your personal affairs and the remaining will be considered to utilize to pay the home loan EMIs. This second home loan EMI portion is supposed to change in future as your employment status changes, thus changing your income status. The income considered for a salaried is different from a self-employed. The taxable income of both professions is also considered accordingly.
As your income helps bank to decide whether you can pay back the home loan or not, your current debts pay a major role in the same. If you have current loan debts or credit card outstanding, you must be paying their EMIs. Excluding the current EMIs, bank has to consider that you still will be able to pay your home loan EMIs. If you have a current small loan or credit card outstanding which will end in short tenure, bank will consider approving your home loan. But if you have multiple debts for longer tenure, it will affect your home loan eligibility negatively.
Age and remaining years in service:
Banks offer home loans for tenure of as long as 30 years. Banks also consider your remaining years in service as there are very thin chances that you’ll be able to pay back the home loan on time post retirement. The rule is flexible for self-employed as they can guarantee a lifelong or at least longer income span than salaried employees. Your age decides the tenure of your loan. If the gap between your current age and retirement age is very low, then your home loan eligibility will be affected.
Profile of your co-borrower:
Along with your financial profile, the profile of your co-borrower matters a lot. You can add your parents, spouse or relatives as co-borrower for your home loan. The co-borrower does not need to be a co-owner in your property. But the bank considers his/her income level as well. If you default on your loan, the co-borrower is held responsible to pay it back. Thus bank needs to make sure that at least he/she will be able to pay it back on your behalf.
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