5 criteria banks consider before sanctioning home loans

Purchasing a house is one of the biggest but probably toughest aspirations to accomplish nowadays. Most of them take the leap of owning a home at some point by acquiring a house loan. For that, ensure you can take up additional responsibility for home loans.

Before you apply for home loan, you must create a checklist regarding the eligibility, documentation process, to make sure the application procedure is smooth. To ensure everything is on point, you should understand the requirements of different financial institutions.

Every lender has certain criteria in place to sanction the loan. What are they?

  • Credit history: Good financial history and habits please the lenders. Clean financial profile means a clean and positive credit history. The banks will check if you have defaulted the previous EMIs. The credit history should be anywhere between 750-800 for the lenders to approve them. If it is below 300, lenders reject them right away. A good credit score will only fasten the approval process. It will not reduce interest
  • Documents: Home loan documents play a vital role to fasten the application process. You have to submit papers related to the property or house you intend to purchase. The banks examine the files provided by the builder, essential permits and clearances from the municipal, and the Government. The project should be a viable one. The builders should be trusted and reputed. The other basic documents needed by the lenders are ID proofs, address proofs, employment proofs, and income proof. They have to be in place before beginning the application process.
  • Occupation: The lenders need surety about your job stability. Frequent change of jobs implies you are incapable of paying the EMIs. Banks mostly prefer applicants who hold Government job as they are secure. Professionals such as doctors, chartered accountants, lawyers, are also given preference. Since the private sector is unstable, they are given least preference. Plus, you must be part of your current job for at least three years to get the application approved.
  • Debts: It is essential to produce to the lender the history of your obligations and debt-to-income ratio. You have to present the ongoing loans and EMIs to the bank to evaluate if you can pay the remaining debt with your current income. The income-to-debt ratio should not exceed 40 per cent of your salary. So, tread carefully before availing of a house loan.
  • Age: Banks usually prefer candidates who fall in the age range of 30 to 50 years. These people have the security of income. If you are approaching the retirement age, the chances of repaying the loan amount are

Hence, take prior measures when you apply for home loan. Be systematic with your approach and have all the documents in place.

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