Factors Considered By Financial Institutions Before Approving Home Loan

According to June 2019 reports by RBI, financial institutions involved in the Indian market recorded around Rs.22.5 lakh crore in personal credit advances. Of this, more than half of the credit advances were in the home loan sector. The finances invested in housing stood at Rs.11.8 lakh crore. This data goes on to show the huge number of credit lines being involved in providing a home for households.

With innumerable families and individuals applying for financing either online or via a home loan apps, it is important potential borrowers learn the factors which affect a home loan approval. Along with basic financial aspects, many other aspects of a customer are also checked before a home loan is approved and disbursed. 

Factors Considered for Home Loan Approval:

These crucial factors are discussed in details below –

  1. Credit score: Also known as the CIBIL score, this 3-digit number signifies the financial and debt situation of a person. Beginning at 300 and extending to 900, a score of 750 and more is generally considered healthy for home loan approvals.
    Vitally, this score depends on debt repayments and other financial conditions of an individual. Non-repayment of debts impacts this score in a negative way; often, defaulters find themselves in a situation where they are not granted any loan by financial institutions. Existing debts are not much of an issue, but unpaid credit accounts can be detrimental to the score.
    Additionally, along with approval, it also affects the rate of interest offered by NBFCs. 
  2. Occupation: Not only do financial institutions look into the employment status of applicants, but they also look into the type of organization where an individual is employed. With this factor, NBFCs try to gauge the reliability of an individual’s employment.
    Typically, individuals employed in government institutions, public sector organizations and reputed MNCs have a higher chance of home loan approval. Contrastingly, self-employed individuals often have lower chances of approval unless they have a very healthy credit history.
    Individuals going for home loans should look up their present credit situation and account details from the best loan app before applying. Planning well in advance can lead to very convenient rates of interest.
  3. Income and debt-to-income ratio: Lenders consider two aspects of an individual’s income. While primarily it is the monthly income, they also consider the portion of income spent in clearing past debts and therefore effectively their net income. The projected salary over years are also considered while deciding on the rate of interest as well as the repayment tenor that is granted to a borrower.
  4. Age: Especially for salaried individuals, the number of earning years left as an employee directly affects approval as well as rate of interest offered. It is better for borrowers to opt for home loans during the early years of their career so that they have a long tenor, and as a result, receive approval of greater loan amounts.
    Using a home loan app, customers can easily keep a tab on their home loan repayment details through the whole tenor.

  5. Property details: Numerous characteristics and features of a property are checked by financial institutions before approving a loan. Essentially, by deciding the value of a property which acts as a mortgage, NBFCs safeguard their investment. Customers who chose properties with rising value get better rates of interest.
  6. Down payment: NBFCs approve only a portion of the total expense in buying a home. Therefore, the total down payment amount that an individual can afford also decides the loan amount.

    For down payment, customers can avail a personal loan. A personal loan comes with instant approval. Besides, the loan gets credited to your bank account within 24 hours of approval. In addition, these loan accounts can be conveniently managed by customers using their online loan app. These apps remind users of their EMI clearances as well as inform them of updates in interest rates and benefits.

    Customers should use instant loan apps and calculate the amount still left to repay after clearing the down payment once a loan is approved.
    Additionally, financial institutions like Bajaj Finserv bring you pre-approved offers that make availing loans quick and easy. Pre-approved offers are available on numerous financial products like personal loans, home loans, and business loans. You can check out your pre-approved offer by providing your name and phone number.

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