What is a Home Loan?This is a certain amount of money lent by a bank or financial institution to an individual at a certain rate of interest subject to repayment of a fixed amount or EMI (equated monthly installment) every month for a fixed tenor. Against this loan, the lending company takes security in the form of such property till such time; the loan is not repaid.
How is the Eligibility of Home Loan calculated?To decide the home loan eligibility, lending companies follow home loan eligibility criteria. Though, it is an estimated thumb rule that the home loan offered by a lender is approximately 30 times of one’s net income; the same may change post consideration of various home loan eligibility criteria. Therefore, it is advisable that one is aware of these criterions. Some of the factors considered are:
- Net Income – In case of a salaried individual, this is the total of basic salary, house rent allowance, leave travel allowance, performance bonus or incentive, conveyance allowance, food vouchers, medical allowance, and any other allowances. However, many lenders may consider only a few of these allowances while computing the home loan eligibility;
- Eligible Age – Usually the minimum age considered is 24 years with a maximum age of 60 years at the time of applying for the loan. However, the same may vary for a salaried or a self-employed individual;
- Minimum Loan Amount – This is the minimum home loan computed based on one’s eligibility;
- Co-Applicant – Though, this is not mandatory; most lenders consider an immediate family member as a co-applicant for the home loan;
- Employment/ Business Vintage – A fixed vintage of 2-5 years is usually considered for home loan eligibility;
- Credit Score – CIBIL or Credit Score is one of the primary credit tools utilized for computing one’s home loan eligibility. A good score. i.e., above 650; will also determine the loan amount, rate of interest, and other factors. Poor credit history with delays, poor repayment track records, defaults, and fraudulent tracks; will not lower one's home loan eligibility but also may result negatively in terms of higher interest rates or cancellations of loan applications.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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