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Owning a dream house is an aspiration made a reality by banks/financial institutions through home loans. The prospective home buyers exercise due diligence in selecting the locality and the lenders while planning the project. Thoroughly research regarding the lowest interest and other charges prevailing in the market in addition to the processing time required before choosing the lender.
But the lenders also exercise the same diligence before accepting the proposal. For e.g – if you are seeking a home loan from LIC Home Loan expect that the lending body will have certain parameters that have to be complied with before you can be approved for the home loan sought. As a result, in this case, the LIC Home Loan Eligibility check might be a significant step a homebuyer may have to overcome to fulfil their dream.
Factors that affect the eligibility for a home loan
Factors affecting home loan eligibility are as given below:
Age
The current age and the residual years of service are considered to fix the repayment terms. The higher the loan tenure, the lower will be EMI. Your repayment capacity helps decide the final loan amount. Generally, there will be a check on the amount available from out of your salary to fund the EMI after fulfilling the existing commitments.
If you avail of the loan at a young age, you will get a longer repayment term, which means lower EMI. If you plan to avail of a home loan when you are nearing retirement, then the tenure will be very low, and the EMI higher and your salary may not be able to support the additional obligation.
So, if you are looking for a higher amount, then it is better to avail of the loan at a young age since age is one of the main criteria that impact home loan eligibility. Alternately, you can consider availing of the loan along with a co-applicant who has a regular source of income to enhance your home loan eligibility
Credit Score
Credit Score is one of the crucial parameters to consider a home loan favourably. Higher is someone’s credit score; the better are their chances of approval of the home loan application. A good score indicates that you have the financial discipline and honour your existing commitments within the given time. Your current EMIs and credit card payments are being made on time. A higher score will fetch added benefits like the best interest rates, concession in other charges and better terms and conditions. Lenders are always looking for applicants with good scores since such loans turn out to be good assets.
Contrarily, if your credit score is not good enough, it means that you are not making the payment of current obligations promptly. Either the payments are made with delay, or you are defaulting on the payments. If your credit score is low, then the chances of getting a favourable decision will be very bleak. The likelihood is that some lenders may still consider your applications but with a higher interest rate and stringent terms and conditions.
Existing debt obligations
While assessing your home loan application, the lenders arrive at the Fixed Obligation to Income Ration (FOIR), which indicates the ratio of your income to the current debits like mandatory bills and credit card dues repaid out of your current income. If FOIR is not within the desired limit, i.e., 40% to 50%, then the chances of your loan application being rejected will be very high.
Before applying for a home loan, arrive at the FOIR by summing up your current debt obligation along with the proposed EMI. If it is within the desired level, then it is a go-ahead for you. Otherwise, consider bringing down the current obligations by closing the debts with lower outstanding liability to bring the ratio within the limit.
LTV ratio and value of the property
Loan to Value (LTV) means the extent of finance available vis-a-vis the property value. As per the RBI guidelines, the lender is permitted to finance 75% to 90% of the property’s value. The borrower must contribute 10% to 25% of the property value. The down payment that comes as a margin from the borrower is also an indicator of the borrower’s creditworthiness.
Income
Most of the lenders have set minimum income criteria depending on the city you reside in. It usually varies between 15000/- to Rs. 25000/-per month. The lender will assess your application if your income is within the benchmark level. Else, there are all chances of your application being rejected.
Employment Status
Like your income, your employment status is equally important to assess your eligibility. If you are employed in an MNC, reputed Private Limited Company, or a Public Sector, the lender considers you a reliable borrower. Similarly, if you are self-employed with a stable income for over three years, you will be regarded as a reliable borrower. It is more likely to get a favourable credit decision with a steady income.
Age of the property
The age of the property is crucial to assess eligibility. If the property you propose to invest in is ancient, investigations will be conducted regarding the structural strength, legal aspects and technical aspects. In such cases, the lender may consider the existing properties and other assets before sanctioning the loan.
Dependants
If the number of dependants is more, then the disposable income available for repaying the loan will be lesser. This is the inference drawn by the lender, and it can affect your home loan eligibility.
Are you planning to own a house? If yes, you can consider loans from organizations like LIC that offer a highly flexible 30 year repayment period. You can fulfil your dream by availing LIC Home Loan at attractive interest rates. However, if your loan application has to be considered favourably, ensure that you meet the LIC Home Loan eligibility norms.
The LIC Home Loan Eligibility norms are similar to most lending eligibility criteria. These include:
- The borrower is more than 18 years in age.
- Salaried employees are working in Private/Public/Government Organisations.
- Self-employed individuals with stable income
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