Financing a house with a loan results in a burden of repayments and requires a secure and fixed source of income. This gives rise to the need for a proper financial plan that ensures the availability of funds and adequate management of income and expenses. While availing a loan from the bank, a set budget as per the financial plan can play a key role in timely repayments. 

Before applying for a home loan, it is essential to check whether the borrower fulfills the eligibility criteria required availing of the loan. Such criteria involve the borrower’s age, income sources, existing debts, and credit score. Different financial institutions offer different rates of interest and benefits to borrowers. Therefore, the borrower must compare and evaluate and opt for a financial institution that offers flexible repayment tenures and interest rates. So, let’s get you started on the factors every borrower must keep in mind while applying for home loans. 

What are Home Loans?  

A home loan refers to the amount borrowed from a lender or a financial institution to buy a house. These loans have predetermined interest rates and can be repaid via monthly EMIs, over a tenure of 20-30 years. 

The factors which influence the lending of such loans are listed below:

  • Credit Score

Your credit score depicts your financial status and wellbeing. All institutions and lenders determine your credit score before you avail such loans because it reflects whether or not you will be able to pay your EMIs. There are many organizations like Credit Rating Information Services of India Limited (CRISIL), Credit Analysis and Research (CARE) Limited and Credit Information Bureau (India) Limited that allot an individual their credit scores. The ideal credit score for getting approved for a  home loan is above 700. The credit report should also display a record of responsible financial behavior – in terms of timely repayments, keeping one’s borrowings to a minimum, and so on. 

  • Age of the Borrower 

Age is another essential factor that is checked before approving such loans. If you are a financially stable person, you are given preference over others. Usually, people below the age of 35 and having a stable income can expect better terms while  availing these loans. Similarly, people above the age of 45-50 may find it difficult to get approved for a home loan, unless they have a younger co-applicant with a stable job and good credit score.  

  • Repayment Tenure 

Repayment tenure refers to the total time within which the borrower must repay the loan via installments. There is an inverse relationship between the repayment tenure and the EMI – longer repayment tenures lead to shorter EMIs, thereby being easier on the budget of the borrower, leading to a lower chance of default.  Furthermore, the borrower must always check the interest rate offered by the financial institution. 

  • Relationship with Lender 

There is a higher chance of the loan getting approval if the borrower has a good relationship with the lender based on a good history of timely repayments. Such customers can also try to negotiate better terms with their lenders. 

  • Purpose of Loan 

The purpose behind availing a loan is very important. For example, loans taken for moving in houses are safer than those taken for meeting construction properties. This is because there are many problems associated with construction properties, like delaying possession of the house or approvals. Hence, you must check the objective for which the loan is being applied. The borrower must avail the best interest rates for the home loans.  

Conclusion

Many institutions might not approve your home loans for various factors, including the builder’s reputation, low credit scores and no prior relationship with the lender. Therefore, it is important to keep the above-listed factors in mind before applying for such loans. Nowadays, with the help of a home loan EMI calculator, the amount of equated monthly installments against the principal, interest and repayment tenure can be determined. The values can be revised as per the needs of the borrower. Borrowers must evaluate the EMI amount and choose a home loan scheme that best fits their requirements.  

 

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