We all have dreams that we want to fulfil during our lifetime, and most of us aspire to build our dream home. At some point, we tend to get tired of living in different rental apartments that we don’t own. Hence, we desire for our place, a bigger house and bigger rooms that we can design however we want. And for all this to be possible, taking a home loan is the best choice but more importantly, understanding the need to be eligible for the home loan is indispensable.
What is a Home Loan?
Home Loan is the money that you can borrow from a bank when in need allowing you to repay the amount with EMI (Equated Monthly Installment) every month at a particular chosen rate. The loan has to be taken against a property that is a security for the lender, ensuring that you repay the loan on time. If you fail to pay the due amount within the set period, the outstanding amount can be recovered by the lender by selling that property.
The types of a home loan include from Home Purchase Loan to Home Improvement Loan and Home Extension Loan to Home Construction Loan. There are floating, and fixed interest rates and you can compare home loan interest rate according to what is affordable to you.
Being eligible for a home loan is exceptionally vital and decides the amount that you can avail. It is crucial to check home loan eligibility before filling the application to avoid any chances of rejection. Following is the eligibility criteria for a home loan:
- You have to be salaried, be a businessman or be a self-employed individual to be eligible for the loan
- Your age and income are critical factors in deciding the eligibility
- Assets and liabilities are taken into consideration
- Your credit history is also crucial and vital in determining your eligibility for a home loan
- CIBIL Score is another deciding factor
Why is being eligible for a home loan important?
It is accurate that your loan eligibility contains the key to your dream home because even if you have the financial means and capability of buying a home with the help of a loan, it is in vain if your loan application is rejected. It is crucial to meet the above eligibility criteria to be eligible for a home loan.
Essential Factors that play a role in your eligibility
This is taken into consideration when you apply for a loan depending on your income and other factors. The maximum amount of the loan you can avail is dependent on your repaying capacity.
Your CIBIL Score is calculated according to your credit history, and a good CIBIL Score proves your creditworthiness and makes it easier for the lender to trust you. It is an important factor considered by the lenders before granting a loan. You will face a lot of challenges if you have a poor score.
Your existing loans are considered before you get a new one. Your eligibility depends on your current loans because if you have ongoing loans with a huge amount, it results in a low repayment capacity and hence it isn’t easy to get a new loan. It is wise to close or reduce the ongoing loans before applying for a new one.