Your friend applied for a housing loan and he got a certain fixed sum as the loan amount. When you applied for the same, the bank sanctioned only 80% of the amount which your friend was able to obtain. Why is there such a difference? Your bank must have informed you that according to your eligibility, you are entitled to avail a maximum loan amount which was sanctioned by the bank. How did the bank calculate your eligibility? What factors affect your eligibility for getting a home loan and the maximum loan amount that you can avail? Learn about the eligibility rules in this article.
Rules may vary from bank to bank, but the basic structure is the same
The criteria based on which a bank or any lender calculates your eligibility for a home loan are the following:
Your income: Your salary if you are employed, your income if you are self-employed, and your PF and pension if you are retired. In case you do not have any income, depending on the terms and conditions of the bank, it may take the income of your guarantor as the basis. The bank takes your take-home salary and fixes a certain magnification, like, for example, 70 percent of your net salary as the loan amount if salary is your lone source of income.
The property: You are taking the loan against a property, which may be a plot where construction of the house is planned or an apartment. In the alternate case, you may purchase an already built home or apartment, which serves as the mortgaged property. If the house is used or old, pre-calculated percentage depreciation will be added to the net worth of the property.
Additional income: If you have any extra sources of income like a business, your partner’s income, income from a property like rent, lease or farming, provident fund deposit etc will be added to your total income, and subsequently this increases your eligibility scale. In case of your partner’s income, adding him or her as a co-applicant will increase the loan amount proportionally. The lender also considers your investments, gold and precious jewelry in hand and other material assets while checking your eligibility.
Existing debt: The bank gives utmost importance to any current debts including all types of loans, accountable debts, and installments while calculating your loan score. If you have any lapsed installments or bad loans, this will affect the loan credit and thereby the amount sanctioned as a home loan.
Basically, any bank checks via all these factors, your repayment capacity and its safety of getting back the loan and interest through either your payments or the mortgage in case of failed repayment.