Tired of living in a rented house? Shifting your belongings from house to house is a hassle? Why not have your own home? You have short listed your dream home. All you have to do is avail a home loan. You have decided to avail a home loan from a reputed bank.
The problem: Will the bank sanction your home loan?
The first thing banks check before sanctioning your home loan. Your income. You need to have a good income, for banks to sanction your home loan. There is a high chance of your home loan being sanctioned, if you work for a reputed Company and earn well.
You also need to have a stable career. Banks prefer you to have good work experience. Home loans have a tenure of 15 years to 20 years. You also borrow several lakhs of rupees in a home loan from the bank, as houses in metro cities can be very expensive. You can repay a home loan, only if you are well settled in your job and career. Banks generally sanction a home loan which is 50 to 60 times, your monthly take home salary.
When you buy a house, you get only 80-90% of the cost of the house, as a home loan from the bank. This 80-90% is called the LTV (loan to value ratio). You have to arrange the remaining 10-20% of the cost of the house yourself (from your own money). This is the down payment.
If your home costs INR 50 Lakhs, you can avail a home loan of only INR 40-45 Lakhs, depending on whether the bank has an LTV of 80% or 90%. The bank will assess the value of your property based on market rates of the property in the area, where you are buying your home.
Banks check your home loan eligibility based on your income (Banks go through your salary slip). Banks then go through your bank account statements. Banks do this to check if you are servicing (repaying) any other loans (Do you have any existing loans?). If you are making regular repayments towards a car loan or a personal loan, you might struggle with your home loan repayments. Banks want to make sure this does not happen. Banks also get an idea of your other expenses. Banks expect your expenses and loan EMI’s together, not to exceed 50-60% of your monthly income.
SEE ALSO: Home loan taking too long to repay?
The age at which you retire, plays a very important role in getting your home loan sanctioned. Most Companies fix your retirement age as 60 years. So banks fix the age limit of repaying your home loan, as 60 years.
If you are young and have many years to retirement, you have a long tenure to repay the home loan. If you are earning well and have a stable job, you could comfortably pay the home loan EMI’s. If you are over 45 years, you do not have a long time left for retirement. Banks might not sanction your home loan.
You need to have a good credit score to have your home loan sanctioned. Banks will check your cibil score before sanctioning your home loan. Banks send the record of your repayments to Cibil each month. Cibil, Credit Information Bureau (India) Limited, collects and maintains records of your past loan and credit card repayments. This information is used to create a report called CIR (Credit Information Report). Based on this report, CIBIL assigns you a score between 300 to 900 called the CIBIL TransUnion Score. You need to have a good cibil score of around 700 to 750, to get your home loan sanctioned.
So why are you waiting? Avail a home loan and grab your dream home.
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