An Insider On How A Bank Decides Your Home Loan Eligibility
The home loan eligibility of an individual is decided based on the individual’s income, type of employment, age of an individual, property titles, and CIBIL score & also based on current debts being running on an individual. The home loans market in India is so competitive that the banks or NBFC’s need to struggle to find borrowers. The Home loans market is fiercely competitive. On the other side, the NPA’s [Non-performing assets] of the banks are rising. Thus the banks are very cautious about extending the loans to the borrowers. The borrower needs to have all the necessary documents as per the requirement of the bank. The documents are required to depend on whether the home loan applicant is an employee in an organization or self-employed. The applicant can avail of the home loans from any of the banks depending on the interest being charged by the lender and based on the terms & conditions of the lender and also based on the reputation of the lender. Even in the case of the one lender who rejects the applicant’s loan, the applicant can apply for another lender for the home loans to another lender.
The loans can be availed up to 80% of the property value, while the remaining should be a down payment. If requested too high, the home loan’s principal amount, then in that case as well the loans can be rejected of the borrower. The bank sanctions the loans according to the borrower’s income and the age of the borrower. In case of a delayed payment of the installments, the borrower may charge a penalty to the borrower, and also, the CIBIL ratings of the borrower can get affected. If the CIBIL rating of the home loan applicant is found to be poor, then usually, none of the lenders is willing to extend the loans to the applicant. The co-operative credit societies are the ones who are sometimes lenient for extending loans to even the ones with poor CIBIL scores or provide higher credit compared to the salary criteria. The income tax returns payment is also a significant criterion for the banks to process an individual’s loan. The banks expect perfect documentation, a perfect CIBIL score, and an honest taxpayer of home loans as the chances of such applicants repaying loans on time are high.
Following are the six steps involved in the approval of loans:
- Income of an individual:
An individual’s income plays a vital role in the approval process of an individual’s home loan. The credit amount is extended to the lender depends upon the monthly or annual salary that an individual gets. The higher the income of an individual higher is the loan being approved by the bank to the borrower.
- Type of employment:
The home loan applicants are expected to be employed in an organized sector or have a registered proprietorship firm or a registered entity. In the case of the contractual employees or the daily wage workers, or those who do not have proper employment proof, banks do not extend the loans to such an individual. Hence a good source of employment is essential. Also, if the home loan applicant is employed in a hazardous sector, then without the guarantor, loans cannot be approved.
- Age of an individual:
The most preferred customers of the banks are the people in the age group of 30-45 years as these customers are the ones who have many years of experience and also are amongst the ones who have many years for retirement. The eligibility criterion for obtaining loans is 21 years- 60 years or up to the retirement age, whichever is early. On the other hand, the age groups of people between 55-60 are amongst the least preferred customers of the banks as the productive years of this age group people is significantly less.
- Property titles:
The borrower should have property documents with clear titles. The first verifies the property documents of the land records from the registrar or collector office, and only after that, the loan is being processed by the borrower. The bank firstly ensured that property on which the loan needs to be approved should not be amongst the disputed property.
- CIBIL score of an individual:
The CIBIL score of an individual should be in the good or excellent category. There should not be any delay or default in previous EMI’s payments or else the credit card bills. In case of the lower CIBIL score due to delay or default of loans, none of the banks or NBFC’s provide loans to the borrowers.
- Income tax returns:
The ITR returns should be paid timely by an individual. The honest taxpayers are the preferred ones as the same may not also default on the bank installments as well. Also, as per the RBI mandate, the borrowers should be provided loans only to those who are honest taxpayers.
Conclusion:
Thus the home loan applicant should follow all necessary steps for the approval of home loans. The documents should be submitted appropriately, and also the ITR returns should be filed correctly. Also, the land records should be proper where the loan is applied. The banks are very cautious about providing loans to the borrowers as the non-performing assets of the bank are increasing very rapidly. Thus the loan applicant is expected to follow proper procedure and proper documentation while applying for the loans.
