Realising your dream of owning a house requires substantial time, effort, and financial resources. It can certainly take up a huge chunk of your savings. A Housing Loan will help you navigate your financial responsibilities without overwhelming your budget. Before delving into the documents required for a Home Loan, understanding the factors affecting your Home Loan eligibility is crucial. This will empower you to secure the desired loan amount at favourable interest rates.
Critical factors that influence your Home Loan eligibility
1. Credit score
It is a major factor that affects your Home Loan eligibility. Lenders prioritise your credit score while assessing your Home Loan application. A high credit score showcases responsible credit management and timely loan repayments. Striving for a credit score of 750 or higher boosts your eligibility and opens doors to superior loan terms.
2. Employment status
If you are a salaried individual, having a tenure of 2-3 years within your current organisation is typically preferred by lenders for Home Loan approvals. Consistent employment with steady income assures lenders of reliable repayments. On the other hand, if you are a self-employed applicant, you will undergo scrutiny of your business performance to ascertain eligibility. Generally, self-employed individuals get higher interest rates than salaried individuals due to fluctuating business cash flows.
3. Debt-to-income (DTI) ratio
It measures the relationship between your monthly debt payments and income. Lenders use this ratio to evaluate your ability to repay loans. Enhancing your Home Loan eligibility involves maintaining a low DTI ratio, which can be achieved by settling existing debts and refraining from accruing new ones. A low DTI ratio showcases that your income is good enough to fulfil monthly loan commitments.
4. Down payment
It represents the initial upfront amount you need to pay towards the purchase price of a property. Lenders typically finance a considerable portion of the property cost, ranging from 75% to 90%. When you pay a substantial down payment, it demonstrates your commitment and lowers the required loan amount. A larger down payment enhances your eligibility and lowers the pressure of monthly loan repayments.
5. Age
Lenders typically establish age criteria for prospective borrowers, ranging between 21 and 65 years. They often favour younger applicants owing to their potential for longer careers and financial advancement, making repayments more manageable. If you are in your 50s or approaching retirement, you may face challenges with fewer working years ahead.
Also Read: Top 6 factors for selecting the right Home Loan
Conclusion
Meeting the eligibility criteria for a Home Loan can prove to be beneficial. It will enable you to negotiate lower Housing Loan interest rates and secure a greater loan amount with favourable terms and conditions. With an Axis Bank Home Loan, you benefit from a swift and seamless loan approval process and enjoy additional perks, such as no prepayment charges and highly competitive interest rates. It lets you fulfil your dream of homeownership with ease and convenience.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
