Top 5 Attributes that can influence Your Home Loan Eligibility

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09 JUNE, 2021

A home loan can help you get the required funds for purchasing your dream house. However, before applying for a home loan, ensure to check your home loan eligibility beforehand. Once you know about the factors influencing home loan eligibility, you can boost your chances of approval. Some of the most common aspects that influence home loan eligibility are mentioned below:

Age
Young home loan borrowers are more likely to move up in their careers or business over years, which in turn will improve their repayment capacity. At an early age, you can get a home loan up to 20 years, which you can easily repay over a period of time. On the other hand, home loan applicants who are in their 40s or 50s may have a lower-risk appetite and more financial responsibilities. This could reduce their home loan eligibility.
Debt-to-Income ratio
The debt-to-income ratio is the percentage of your gross monthly income spent towards your monthly debt repayments. The lower your debt-to-income ratio, the higher will be your chances of qualifying for a home loan. This is because a low debt-to-income ratio will reflect a good balance between debt and income, and lenders may consider you a low-risk applicant.
Credit history and credit score
Credit history and credit score play a key role in determining your home loan eligibility. Your credit history will provide the lender with all the necessary details such as active credit accounts, balances due, repayment history, etc. Whereas, the credit score will determine your creditworthiness. The higher your credit score, the more are your chances of qualifying for the home loan. The credit score ranges from 300-900. Make sure that you have a credit score of 750 or above before applying for a home loan.
Professional background
Your job profile and stability, work experience, and employment history also determine your home loan eligibility. Applicants with government, corporate or banking backgrounds usually have a higher home loan eligibility as compared to freelancers, or people working in unstable or high-risk occupations.
Property’s attributes
While reviewing your home loan application, lenders may visit the property you wish to purchase for carrying out a technical evaluation. Aspects such as the age of the property, its market value, surrounding locality, whether the builder has obtained the No Objection Certificate (NOC) from the government, etc., affect your home loan eligibility.

While availing a home loan, it’s advisable to make a sizeable down payment. Though this may not influence your home loan eligibility directly, it will significantly impact your EMI amount. If you make a higher down payment, your home loan amount as well as the EMI will reduce. This will also decrease the repayment burden of home loan.

Before applying for a home loan, it’s essential that you make a note of all the aspects mentioned above. You can also make use of an online home loan eligibility calculator to check your home loan eligibility. Apply for a home loan only if you satisfy the eligibility criteria. You can seek a financial advisor’s help in case of any further queries. It will also enable you to take a well-informed decision.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

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