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Housing Loan Eligibility Factors That Lenders Consider When Evaluating an Application

Home loans are a boon — they allow borrowers to invest in the real estate sector with the help of a lender and then pay off the lender over a stipulated period in the forms of equated monthly instalments. The popularity of home loans has increased multi-fold over the last few years, which in turn, has led to more and more people applying for home loans. Lenders get thousands of applications each month and must assess each application carefully to ensure they are not lending money to a borrower incapable of paying their EMIs. All lenders therefore have strict home loan eligibility requirements that borrowers must meet — these eligibility requirements help lenders identify high-risk borrowers or borrowers with low repayment capacity. Housing loan eligibility requirements vary from lender to lender, but most lenders require borrowers to meet the following eligibility requirements at least:

– The applicant must be a resident citizen of India. 

– They must be between 25 and 70 years of age. Age requirements vary from lender to lender. Further, the maximum age defined is always the age of the borrower at the time of loan maturity. 

– The applicant must at least have a credit score of 750 or above. 

– The applicant must have at least three years of work experience or must be able to show at least 5 years’ business vintage. 

These are generic qualifying criteria that lenders ask for. However, your lender may have different qualifying criteria. So, before applying for a home loan, it is best that you go to your lender’s website and check their home loan eligibility requirements. Meeting your lender’s eligibility requirements will lead to quick loan approval at lucrative home loan rates and you becoming eligible for beneficial home loan offers. Not meeting your lender’s eligibility criteria will lead to your application getting rejected, your credit score taking a hit and your chances of availing of a housing loan in the future going down considerably.

If you are applying for a housing loan and want to become eligible for good home loan offers, you must develop an understanding of the factors that affect your home loan eligibility. 

Housing Loan Eligibility Factors That Lenders Consider When Evaluating an Application 

Credit Score 

The credit score is a three-digit number between 300 and 900 that is reflective of a borrower’s repayment capacity and creditworthiness. To be eligible for a good home loan offer, a borrower must have a credit score of 750 or above. The higher a borrower’s credit score or the closer it is to 900, the higher their creditworthiness. If you are applying for a housing loan, know that the first thing your lender will check to evaluate your home loan eligibility is your credit score. So, before beginning your housing loan application process, check your credit score and move ahead with the loan application only if your credit score is at least 750.

Job and Income Stability 

Your job and income stability determine how easy or difficult it will be for you to repay your loan. Borrowers with a stable job and stable income stand a better chance of getting approved for a loan on lucrative loan terms and conditions than someone who switches jobs or professions constantly since the former group is less likely to default on loan repayment than the latter group. If you have changed jobs frequently in the recent past and therefore, have low home loan eligibility, you can enhance your eligibility by including income from other sources, such as rental income, income from shares and fixed deposits, etc. to convince your lender of your repayment capacity.

Age of the Borrower 

The age of the borrower is another crucial factor that affects one’s home loan eligibility. Borrowers in the early stages of their career have more working years ahead of them and are more likely to get more promotions in their career. Young borrowers are, therefore, far less likely to default on loan repayment than say someone who is nearing their retirement age. Therefore, young borrowers have higher home loan eligibility than borrowers in their late 40s or early 50s. 

Quality of the Collateral 

Lastly, the quality of the collateral is another factor that lenders evaluate while evaluating an application. Home loans are loans backed by an asset or collateral. In case of loan default, a lender can sell the pledged property for loan recovery. Thus, lenders evaluate the quality of the collateral while deciding a borrower’s home loan eligibility. Properties located in central locations, having all modern amenities and high resale value, enhance a borrower’s home loan eligibility. On the other hand, properties located on the outskirts or old properties having low resale value, diminish a person’s eligibility for home loan offers.

Final Words 

If you are planning to apply for a home loan, it is crucial that you develop an understanding of all the factors that affect your home loan eligibility. Having this understanding will not only enhance your chances of home loan approval but also allow you to negotiate for better home loam offers. Further, remember to use a home loan EMI calculator to get a clear understanding of the EMIs you can afford each month and borrow accordingly. This is crucial to ensure stress-free loan repayment. 

Ahsan Khan
Ahsan Khan
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