Home Loan: Increase the Home Loan Eligibility Criteria

Home Loan: Increase the Home Loan Eligibility Criteria

Today, many banks and financial institutions provide with a bundle of facilities for providing finance to the general public as well as to corporates and others. Some of those finances that can be taken as examples are as follows:

-        Personal Loan

-        Housing Loan

-        Car Loan

-        Business Loan

-        Mortgage Loan and many more.

The norms of providing such financial facilities differ from bank to bank and institution to institution. In this article we will consider the norms, i.e. eligibility criteria of a person, as an individual as well as a group, for availing housing loan. Housing Loans are provided for the purpose following purposes:

-        For purchasing plot and constructing a residential house thereon

-        For constructing a house on the already owned/leased land

-        For purchase of flat that will be constructed by the builders or others

-        For purchasing an already built house

-        For making extension or addition in the existing house

-        For repairs or renovation of the existing house.

In general parlance, banks and other institutions go for the following eligibility criteria:

-        An Individual must be of an age less than 55 years. In case where relaxation is provided the maximum age may differ. In case where the age exceeds the maximum limit, a co – borrower shall join the loan.

-        In case of salaried person, he/she must be in confirmed service of at least 3 years.

-        In case of people who are near retirement age, should have minimum 5 years of service left with them.

-        Self Employed people also must be in employment for at least 3 years and that too in a gainful employment.

This is the normal criteria adopted while lending. So in order to increase your own eligibility, you can consider the following points:

The Profile of the borrower: The personal details of the borrower such as higher education, well settled profession, less dependent, higher value of assets and lower liabilities contributing to high net worth in the case of self employed person, handsome salary and long employment term with one employer, etc. may add to the positive points thereby increasing your eligibility for availing housing finance.

Area of house for which loan is to be borrowed: It is a technical point to be kept in mind. Try to purchase or construction house property at a area which is well settled and can fetch more market value in future. This will help to increase chances of availing housing finance as the banks may consider it as a standard asset.

Age of the borrower: Try to avail housing finance at a younger age. As the maximum age for availing housing finance is around 55 – 60 years, prefer to borrow at the age from 20 to 40 so that you can extend the term of the loan for 20 to 25 years.

Creditability: Now a days, bank can get all your credit details from the previous financial facility, if any availed by you. They get it from Credit Information Companies (CIBIL). These companies store your details on the basis of your PAN. If you have made any default in repaying the previous financial facilities, your eligibility for availing housing or any finance come down to negative and you may have to face very high security criteria. So by repaying the financial facilities availed by you on time may add to your creditability, thereby increasing your chances of availing housing finance.

Other financial Facilities enjoyed by you: If you are enjoying other financial facilities such as car loan, credit card, etc. you are suppose to repay such credits also. This will decrease your ability to pay the new housing loan you may be planning to avail. As per the rule, when 12 installments of a credit facility are outstanding, may be considered as a loan outstanding. So, if you have enough liquidity, you can repay such outstanding loan in full or in part, which may help to reduce the number of installments payable by you. Thus, try to repay your outstanding debt so that the capability of repaying new finance increases, thereby increasing your eligibility criteria for availing a housing loan.

Increase in income: Finance is granted based on your income. The Higher your income, the higher the amount of loan you can avail. So is you are a salaried person, try to increase your take home pay, that will result in an increase in your repayment capacity. Banks calculate the loan amount on the basis of that the amount of loan that may be sanctioned is less than or equal to 48 times of your take home salary. And if you are having any other debt and have to repay the same, the same is also deducted from your repayment capacity.

Repayment Capacity: You must try to increase your repayment capacity, which will increase your eligibility for availing housing loan. Your repayment capacity is calculated on the basis that, your monthly installment can never be more than half of your take home pay. And it may even be reduced when you are already repaying the existing loans, if any. So you must concentrate on your repayment capacity for increasing your eligibility for availing the housing finance.

Co-Borrowers: If the repayment capacity of an individual does not meet the repayment capacity, he can opt for joining a co-borrower to apply for the housing finance. Generally co- borrowers are close relatives. In case when you are of very old age in such cases also you can opt for a Co borrower.

Lower EMI during initial term: Opt for paying Lower Installments in the initial period of the loan. This will increase your repayment capacity. It is the most common way to increase your eligibility for availing housing loan. Such loan is given on the basis that the income of an individual increases as the time passes. This king of adjustment is known as Step – Up loan in official language.

Tenure of Loan: This is the most suggested tip for increasing the eligibility for availing housing finance. The logic behind the tip is very simple that, if the tenure of the loan is more, then there will be more number of installments payable by you and the amount will be much lower in every installment. This will meet your repayment capacity if you have lower income generated as per records. For example, if your repayment capacity is to be considered on the basis of half of your salary and it amounts to Rs. 10000, if you take a housing loan of Rs.10,00,000 @ 9.5% interest rate for 10 years than your monthly installment may come to Rs. 12940, which is higher than your repayment capacity. But if you increase the tenure of the loan to 18 years, your monthly installment will be Rs.9680. This will meet your repayment capacity and will make you eligible for availing the housing finance.

Other ways to increase your eligibility for availing housing loan can be:

• You can club income of your spouse or children that will increase your repayment capacity.
• Salaried employees have an option of adding up your performance – linked pay and increase your eligibility for availing housing loan.

The above adjustments should be made if and only if they suit your profile otherwise it may sometimes create liquidity and other crisis.