Home loans inevitably involve substantial amounts and given the long tenor involved, impact one’s financial standings. Consequentially, one must make all decisions regarding these loans after careful deliberation and planning. Further, one must also check one’s home loan eligibility beforehand to decide the loan amount in such a way as to maximize chances of loan approval as well as establish one’s candidature for the best loan terms and conditions.
What is Home Loan Eligibility?
Lenders decide the loan amount as well as the loan terms and conditions to be extended to a borrower after carefully assessing the loan applicant’s repayment capacity as well as creditworthiness. Home loan eligibility refers to the criteria that lenders take into account while deciding the loan amount that a borrower or loan applicant can conveniently repay. Several different factors impact an individual’s home loan eligibility, such as age, income, debt-to-income ratio, etc. Calculating home loan eligibility beforehand enhances one’s chances of loan approval as well as negotiating power concerning the loan terms and conditions. We shed more light on this later in this article. First, let us understand what is home loan eligibility.
What is a Home Loan Eligibility Calculator?
The home loan eligibility calculator is an easy-to-use online tool that lets loan applicants calculate the loan amount they are eligible for. The calculator does this calculation based on the information provided. Using a home loan eligibility calculator requires one to follow these simple steps:
1. Select the city in which you live from the first drop-down menu.
2. Next, enter your date of birth.
3. After this, enter your monthly income.
4. During the final step, enter your existing EMI obligations.
Once you enter the following information into the home loan eligibility calculator, the output page of the calculator will show you the loan amount that you are eligible for. This is the amount that you will be able to conveniently pay based on your age, income and existing debt obligation.
When an individual applies for a loan amount they qualify for, lenders understand that they are entering into a fairly safe business agreement with the loan applicant. Thus, in this case, lenders not only approve credit requests quickly but also show a willingness to find a middle ground concerning the loan terms and conditions. However, if a loan applicant applies for a loan amount much higher than what they qualify for, lenders perceive high risk in doing business with the applicant. Thus, in this case, loan approval becomes challenging and if the request for a loan gets approved, it is often on loan terms and conditions that are more favourable to the lender than the buyer.
The home loan eligibility calculator is quick and accurate. It eliminates the chances of any errors. It is also quite easy to use. Most importantly, one need not pay any fees to use this tool. All loan applicants planning to apply for a home loan must necessarily make this highly beneficial and powerful tool a part of their loan application process.
Factors that Affect Home Loan Eligibility
Knowing the various factors that affect home loan eligibility and the impact they have on it allows home loan applicants to navigate the home loan process easily and also avail themselves of the best home loan interest rates. So, here’s a look at the factors that affect home loan eligibility.
1. Your credit score is one of the most important factors that affects home loan eligibility. Having a credit score above 750 is seen as a sign of a highly creditworthy borrower. Thus, individuals with such credit scores have high home loan eligibility.
2. Generally, young borrowers have higher home loan eligibility and are offered better or lower interest rates than people nearing retirement.
3. The loan-to-value ratio plays an important role in helping lenders assess home loan eligibility. High LTV ratio loan applications are seen as high-risk deals and therefore, individuals opting for a high LTV ratio loan have low home loan eligibility. On the contrary, individuals opting for low LTV ratio loans have high home loan eligibility.
4. Individuals with high debt-to-income ratios are seen as high-risk borrowers and therefore, have low home loan eligibility. On the other hand, individuals with a low debt-to-income ratio have high loan eligibility.
5. Lastly, the quality of the property matters too. Properties located in central locations and having high resale value have high home loan eligibility.
If you plan to apply for a loan shortly, make sure to use the home loan eligibility calculator and apply for a loan value that you qualify for.
