Want to purchase a new home?
But funding is the hurdle.
Here’s a solution to your problem.
Home loan solves your problem. A home loan helps you fulfil your dream of owning a new house.
What is a home loan?
It is the fund that the bank or housing finance company provides you to purchase a new home, and in return, the borrower has to pay the EMI to the bank. With this amount, the borrower purchases a new house, and the house becomes the collateral for the loan. Before sanctioning the loan amount, the bank verifies certain eligibility criteria for the loan, and certain documents are required while applying for the loan. Here is a comprehensive guide about the eligibility criteria and the documents required to apply for a housing loan.
Eligibility criteria for a home loan
Before applying for a home loan, one should be aware of the eligibility criteria that one needs to meet in order to get approval for the loan sanction by the bank. Both the self-employed and the salaried person can get the home loan if they fulfil the criteria. But the eligibility criteria for both are different.
Here are the eligibility criteria:
1) For salaried persons: The person applying for a home loan must have a stable income source that he makes from a public or a private company or any multinational company. He/she should be working for at least three years and should fall in the age group of 23 to 62 years. Indian residency is also needed. The bank also checks for the credit score, which should be 750 or above, and preference is usually given to the account holder in the same bank where the loan application is done. The documentations needed are:
- Bank account statement
- Newest telephone bill
- Newest electricity bill
- Newest credit card bill
- Valid passport
- Government-authorized identity card along with a photo
- Current house lease that is registered
2) For self-employed person: For a self-employed person to apply for the best home loan should be running the existing business for at least five years and should fall in the age group of 25 to 70 years. He/she must be an Indian resident. The bank also verifies the credit score with the CIBIL, and it should be 750 or above. The bank usually gives preference to those who hold a savings or current account in the same bank where the loan application is done. The documentations needed are:
- Bank account statement
- Newest telephone bill
- Newest electricity bill
- Newest credit card bill
- Valid passport
- Certifying letter of the employer
- Present address mentioned
It should be noted that the home loan can have additional criteria. The above-mentioned maximum age limit in both cases is the age considered at the time of maturity of the loan.
3) For professionals: For professionals like doctors and chartered accountants, there is an additional criterion to meet, which is the qualification criteria, and the remaining criteria remain the same. The qualification for a doctor should be of MBBS or an equivalent higher degree, while chartered accountants must have a valid COP. The experience of professionals is counted after the completion of the degree. These professionals can apply for a home loan for a special offer.
Factors affecting the eligibility criteria for a home loan:
The factors that affect the eligibility of an applicant for a housing loan are as follows:
1) Age: Young applicants are more suitable for long-term loan approval as their loan repayment capacity for the long term is better. A maximum age limit is applied by the lenders to protect the loan from the risk of default on the repayment.
2) Credit score and profile of the applicant: The credit score of the applicant is an important factor that helps the lenders to calculate the risk that is involved with the loan approval. The profile of the applicant is also very much useful, as the profiles with timely repayment history have a better chance of their loan being sanctioned.
3) Employment stability: Financial stability of the borrower is also checked by the lender. The salaried applicant should be working for at least three years, and the self-employed person should be running the current business for at least five years. These criteria for income source depict a stable income source that ensures timely repayment of the loan.
4) Fixed obligation to income ratio (FOIR): It helps to measure the repayment capacity of the borrower. A lower FOIR value increases the chances of your loan being sanctioned. It is calculated as a percentage of one’s monthly income against one’s fixed monthly liabilities like any EMI, rent, etc.
5) Loan-to-value ratio (LTV): It is the maximum loan amount that the bank can provide to the borrower, which is a percentage of the mortgaged property’s current market value. As per the RBI guidelines, 75% to 90% of the mortgaged property’s market value can be the sanctioned loan amount.
Documents required for a home loan:
The documents that are required for applying for a home loan are as follows:
1) A home loan application
2) Passport-sized photographs
3) KYC documents (documents for identity proof) like
- PAN card
- Passport
- Adhar card
- Voter ID
- Driving license
- Business proof for self-employed
- The document is needed to prove the continuity of the existing business for the last five years.
- Income proof
- For a salaried applicant -the newest salary slips needed
- For self-employed – a profit and loss statement needed
- Account statement
- A statement of your primary account for the last six months is required
- Property documents
- NOC – No Objection Certificate
- Title of deed
- Allotment letter
In addition to these documents, applicants may also require other additional documents. Maintaining these many documents can be a risk, so now the digital home loan process provides you with a secure platform where instant home loans can be availed.
All the information provided here gives you comprehensive guidance that you should be aware of prior to applying for a home loan. This informative guidance makes your journey of home loan purchase a hassle-free process.
