Owning a housing property is every middle-class person’s dream. This often entails the need for a home loan as most people do not have and/or want to spend all their savings on a house. In fact, that is a prudent choice for you if you want to maintain a decent lifestyle and save for the future while you purchase a house. However, every person’s home loan eligibility differs by profession, income, choices, life stage, spending patterns, diversification of investment portfolio, CIBIL score, age, and so on.
What are the factors which affect an individual’s housing loan eligibility in India?
- CIBIL score: This score is determined by a person’s debt history and history of repayment success/failure.
- Profession and Personal income: Higher (and more stable) the personal income and projection of income for the future, better will be the home loan eligibility.
- Expenditure patterns: Factors, such as one’s savings, outstanding dues on credit card, EMIs on any unpaid loans, diversification in investments in risky and non-risky assets, etc. determine the quantum of disposable income left towards the repayment of a housing loan EMIs.
- Age of applicant and tenor of loan: The younger the home loan applicant, the better will be the loan eligibility and tenor (given the other factors as stated above are favourable towards them).
- The marketability of the property in concern: A housing loan for a property by a reputed builder attracts better home loan interest rate, and disbursal sum. The reason for this is the property in concern is expected to have better marketability for the future.
Now that we know what an individual’s housing loan eligibility criteria are, let us find out below how one can increase their home loan eligibility:
- Having a CIBIL score of around 700 helps increase a person’s home loan eligibility. It indicates high creditworthiness, which in turn, indicates a higher probability of repayment of the loan sum to the lender. It helps profile a borrower of a housing loan in India as responsible, reliable, with a substantial period of credit history with which their future repayment behaviour can be projected. A good CIBIL score also means lower rate of interest on the home loan. However, if you want a still lower rate of interest on your home loan, try to get a CIBIL score of 750 and above.
It is also important to remember that in case you are applying for a home loan with a joint applicant, the CIBIL score of that person individually would also affect your home loan eligibility, disbursal, and interest rate.
- An individual working in an MNC, government job, a reputed company, or having a stable business over the years is likely to be better eligible for a housing loan than any other person. The riskiness of one’s profession, uncertainties in income patterns, and risk of retrenchment (industry trends), all pose a threat to a person’s home loan eligibility. Thus, you may want to consider these points and try and stabilise your income trends before you apply for a home loan.
- It is a good practise to diversify your investment portfolio into stable/less-risky and more risky assets. Putting money in PPF, FD, debt funds are less risky options as opposed to investing in equity. Even in equity, investing in large-cap and mid-cap may be better for your home loan eligibility over small-cap funds. Lenders would want to be assured that you don’t lose all or a significant portion of your money in risky investments, thereby becoming unable to repay your home loan.
Also, equally important is to pay your credit card bills on time. Don’t pay only the minimum amount due; make it a practice to repay the entire amount due for the month. Even a single delay in credit card payment can affect your CIBIL score and in turn your housing loan eligibility.
- Your age at the time of home loan application matters. The younger you are, and the greater is the number of years of work life you have ahead of you, the better are your chances of being sanctioned a home loan with a better interest rate and a larger disbursal sum (assuming your income and other factors as stated above are defendable). The tenor of the home loan also depends on an applicant’s age and income projections in the coming years, which in turn, determines the home loan interest rate.
- Choose a housing property from a reputed builder with a long-standing history of having built properties on time (or with minimum delay) and no legal problems. These days it is advisable to opt for properties which are RERA approved. While such properties might cost somewhat more than others in the market, they are likely to already have reputed lending institutions and banks backing those projects, and will help your home loan eligibility.
Keep the above points in mind while you consider your home loan eligibility. Improve on these to ensure better chances of approval of your housing loan.