HOME LOAN – Factors that determine your loan amount
This comprises age, income, nature of job, number of dependents, qualifications etc.A bank calculates the eligibility based on income be it a salary or business income.The eligibility for a home loan is calculated on the basis of the income of the applicant and the number of earning years left.
Therefore, the age of the borrower and the time to retirement are important. The younger an applicant is, higher is the loan eligibility.
STABILITY OF INCOME
The stability of employment and income are another factor looked into. The applicant should have been in continuous employment for at least a year. In case the applicant is a professional doctor, CA etc, the approval rate is higher.
Then comes the number of dependents the applicant has. In case the applicant has a small family, the chance of getting a loan will be higher as compared to one who has a large number of dependents on him.
One very important factor nowadays that is considered by banks before lending is the credit score. This is a ‘make or break factor’. The decision of the bank is contingent on the credit score of the applicant. The credit score in turn is based on a host of factors and sum marises one’s creditworthiness.
A bank may interpret the score in different ways, and have different benchmarks and threshold limits to consider before approving or rejecting a loan application.The credit score covers the applicant’s past credit history whether he has been regular in repaying loans, how much he has borrowed in the past, how many defaults, delays in repayment of loans, credit card dues and delays in payments etc.
Making too many enquiries for a loan can also impact one’s chances. Too many enquiries bring down the credit score, even if the applicant has not availed of any loans. Every time one enquires about a loan with a bank, the bank checks the credit score with a credit bureau. This is considered to be an enquiry. Each enquiry pulls down the credit score.
Another significant factor is the existing loans of the applicant be it a home loan, car loan, education loan or personal loan. A bank fixes a total credit limit for an applicant based on income, assets owned, job profile etc. Based on these factors it will compute the likely EMI the applicant can pay. Further, it will compute the total loan eligibility of the applicant.From this, it will deduct the existing loans and arrive at the loan amount which it may disburse for the property purchase.
As far as documents are concerned, an applicant needs ID proof, address proof, photographs, education and employment proofs, salary slips, and IT returns. There may be some other requirements as well.