A home loan is almost every earning adult’s reality at some point in their career, in India. It brings with it the security of owning an immovable property that can be one’s shelter or a source of funds in times of unforeseen crisis in the future. Yet, many people these days, especially of the younger generations, prefer to not buy a home due to the hassles of applying for a home loan which is perceived as a cumbersome and time-consuming process. Also, often they are dissatisfied with the interest rate charged by the bank/lender and consider this investment to be a liability. However, by following the simple 7 points, a person can easily get their home loan application prepared and approved in the minimum amount of time. When all the eligibility parameters are in place and favourable, the lender would not delay approving the loan because to every lender such a loan is their asset.
It is also true that one’s home loan eligibility would differ from another’s, due to the following 7 points. Let us see what these points are and how we can fine-tune these to avail of a hassle-free home loan:
- CIBIL score: CIBIL is a credit agency that maintains individual credit records on all Indian PAN holders—data on credit history, loans availed, timeliness in repayment, defaults or delays, credit exposure (various kinds of outstanding dues at any point in time), current loan balance (including credit card outstanding dues), tenure of credit history, and so on.
It is recommended to keep one’s CIBIL score as high as possible, preferably 700 and above. This can be made possible by never missing a single EMI and/or credit card payment deadline, always repaying dues in full and not just the minimum amount, and maintaining basic credit hygiene.
- Individual Income: An applicant’s present income, historic trends, and income projections affect the home loan calculator which factors in all these 7 points being mentioned here. The bigger the income figure, the better is the eligibility. Similarly, the more regular and stable are the income credits, the better is the eligibility. To ascertain this, documents related to payslips, IT returns statements, bank statements are sought by the lender which are easily available with people.
- Profession: Along with one’s income, one’s profession and occupation also matter. A person with an MNC or Government job is considered better eligible for a home loan in India than anybody else. In the case of a self-employed person, historic data on profitability without legal complications sustained up to the present and the future projections on the same affect eligibility.
- Investment portfolio: Lenders also take interest in how a person invests their funds. If the propensity is towards riskier assets like equity, then the eligibility may get impacted. Investments skewed towards PPF, FD, government bonds fetch the applicant a better score on the home loan calculator.
- The borrower’s age: This is important as a younger applicant tends to be offered a lower rate of interest and a longer tenor on a home loan than their older counterpart (with an otherwise similar profile).
- The market value of the property: The market value of the property for which the home loan is being sought is of great significance. This is a quotient of the builder’s reputation, location, square feet area, facilities and amenities, etc. This is to ensure that in spite of all due diligence on the applicant by the lender, if, due to unforeseen circumstances the borrower is unable to repay the loan, the bank or the lender should be able to sell off the property in question to earn back its loan amount.
- Other factors include the number of the dependents on the borrower, the presence of any other earning member in the family, the size of the family, educational qualification, and so on.
In order to avail a home loan, therefore, an applicant needs to do the following:
- Plan and set up life and career goals and create a milestone for purchasing a house, early on in life. This will help the person invest his funds, plan career moves, save his resources and mobilise them accordingly.
- Basis the above plan, maintain a clean credit history and improve their borrowing and repayment patterns, and also stabilise their income patterns.
- Apply for the home loan by filling up an application with a bank or lender of choice. This decision should be governed by a lender’s reputation, financial stability, customer friendliness of policies, list of charges and their value, and ease of paperwork. Many lenders understand the changing needs of younger population groups like millennials and make their policies suited to their needs.
- Check the trends in home loan interest rate in India. Identify an opportune phase to apply for a loan, which can ensure the lowest interest rate. Currently, the trending home loan interest rate in India is about 6.75%.
With just a little discipline, availing of a home loan in India can be hassle-free and advantageous.