Everything to Know about Evaluating Home Loan Eligibility
The eligible loan amount is nothing but the total amount of money that the banks lend to the borrower. In real estate industry, experts express that the sanction amount by the bank does not solely depend on the income but on the capacity of the borrower to repay. The final Home Loan Eligibility amount that the bank approves is meticulously calculated by them and it is done by identifying the difference between the total expense of the borrower on a monthly basis and the total monthly income.
Factors that contribute to the calculation of Evaluating Home Loan Eligibility amount are:
1. Income of the borrower:
If the income is more, the possibilities of a loan amount granted will also be more. And it is easier for someone with a stable income to get a loan than for someone who is running a small business. Banks also usually ask for 6 months salary slips of the borrower if they are salaried employees in a firm. While evaluating from those facts, the banks deduce Home Rent Allowance, Medical Allowances and Leave Travelling Allowance to find out the total earned income.
2. The profession of the borrower:
Banks and other lenders also segregate various professions under risk groups while considering for sanctioning a home loan. People who are running small businesses and employees of BPOs find it hard to get a loan sanctioned. Whereas, people with stable white collar jobs like engineers, doctors, bankers, etc. have better eligibility than the former. Mr Kunal, who is a doctor, says that it was easier for him to get a bank loan for purchasing one of the flats for sale in Pallavaram Thoraipakkam Road, Chennai.
3. Corporate category of an employee applicant:
Many of the Indian banks have differentiated corporate firms in categories of A, B and C according to their worth and stand in the services they provide. Interest rates vary according to the category of the firm the applicant works in. To elaborate, an applicant employed in a category A firm can be given a greater loan amount against someone employed in category B firm.
Repayment of home loans take a lot of time as the loan amount involved is very high. So, banks consider age as one of the primary factors while evaluating the eligibility of an applicant. According to the age of the applicant, the repayment EMI is calculated and the timeframe is also calculated.
5. The credit history of the applicant:
The credit history is carefully evaluated before sanctioning the loan. Even if it is given, the amount sanctioned for someone with a bad credit history is usually low. Credit history is calculated with the records of already pertaining loan repayment schemes.
How is the home loan eligibility evaluated?
- At first, the banks analyse the statements of income of the borrower, including the monthly salary income and other income from other sources like savings interests, rents, etc.
- Then, the banks evaluate the amount of money saved from the income. This depends on the lifestyle of the individual like the number of people earning in the household, rents paid, liabilities as loans, etc. Banks mostly have a standard percentage to identify average savings of an individual.
- If there are other loans for the applicant, the EMI of the loan is reduced to find out the net savings.
- With the net savings value, banks decide the loan amount to sanction. Banks commonly evaluate the EMI by a reverse calculation method.