Here are the factors banks consider before approving a home loan

The decision to offer a home loan depends on multiple factors ranging from the location of the property, your financial health to your relationship with the co-applicant. The factor may vary from lender to lender, as each bank has its own analysis team for due diligence for loan applications. Here is a lowdown on some of the common factors based on which a bank sanctions a home loan:

Credit history

Your credit score says a lot about your financial well being. Whether you pay your EMI’s on time or you default on credit card payments can easily be verified by banks through your credit report. The good part is high credit score translates into lower interest rates. This is because many banks have moved towards risk-based pricing, rewarding people with a good credit score.  A credit score between 700 and 800 is considered a good score by most banks.

Purpose of loan

Banks prefer ready-to-move houses to under-construction houses when it comes to approval. Similarly, approval for the renovation and repair of a house is easier compared to the purchase and construction of the property.

Relationship with the co-applicant

The home loan eligibility increases or decreases depending on your co-applicant. For example, if you are not able to meet loan requirements alone then banks are open to having your spouse as a co-applicant. In this case, both your income as well as your spouse’s income are considered to determine the loan amount. Moreover, you can have a loan at concessional rates if the house is in the name of your wife. However, banks don’t prefer all relationships as co-applicant. For example, many banks don’t approve brothers or father and daughter as co-applicant. Any future disputes between them are considered as high risk by banks.

Age of the applicant

Banks prefer people in the age bracket of 30 to 50 as they are considered to be stable. People near 60s have lesser chances of getting a home loan as they have a limited number of working years.

Location

The location of the property is also an important factor, as there are many projects which banks blacklist depending on the track record of the builder.

Occupation

Banks prefer borrowers with stable jobs. Therefore, government employees are most preferred by banks. Similarly, banks are more upfront in giving loans to employees of bluechip companies, doctors, and chartered accountants.

Evaluate the above-mentioned points when you apply for a loan next time to get maximum benefits.