Have you decided to buy a house of your own? If yes, then there are majorly two things you have to do. First is finding the property of your dreams and second is finding the best way to pay for it. And one of the best options is to opt for a home loan. But no, it’s not as easy as you think it is. The most important thing is to qualify for the mortgage loan. Your repayment ability is evaluated by lenders based on your earnings, expenses, savings, job profile, financial capability and repayment history of loans and other obligations. If a bad credit score from the past is your friend, it will create a big issue. Not just this, there are a number of factors that play an important part in your home loan approval. We will talk about them all in detail.
If you are considering changing jobs or quitting your job, don’t apply for a mortgage before making a change. Lenders use your employment history to determine whether you are eligible for approval based on your risk profile. If you have a steady source of income, the lender will assume that you have the capability to pay back the loan and meet the monthly EMI requirement. For fully employed people, lenders will also check if you have been in your present job for 3 or more months and have completed your probationary period. In case of self-employed people, lenders will require at least 2 years of your income documents.
The foundation of your easy home loan application is your credit score. In order to obtain this score, you must pay your EMIs and credit card dues consistently. Your Credit Score is based on the credit history of your borrowings from different institutions such as banks, NBFCs, or Housing Finance Companies (HFCs). The credit score is calculated by a trusted entity that shares it further with the banks or the loan providers. If you have a high credit score, then your chances of getting a loan, and getting it at a lesser rate of interest increases. It is important that you check your credit score at least six months before you plan to buy a home, preferably 12 months in advance.
Your budget, down payment and EMI
We all have a budget in mind before we decide to buy a home. Make sure that you decide your budget well in advance. Not just the budget, also ensure that you have a good idea of how much downpayment you can make and how much the loan you need to take. Generally, banks and other lenders provide 80% of the property’s value as home loan. But it is always better to take less amount as a home loan. Make sure you use the EMI calculators to choose the best plan for yourself, the plan which is comfortable for you and your family. In case your salary isn’t enough, you can also show your spouse’s or your parent’s money by making them co-borrowers.
Documents Required for Home Loan
Getting a home loan requires understanding the required documents and being prepared to present them to a bank or housing finance company before applying. For your convenience, here is a checklist that you can refer to before applying for the home loan.
PAN card – Your PAN card will be verified by the lender and then only you will be able to get a home loan.
Aadhar card- This will act as your identity proof.
Bank statements – Typically, lenders ask for your 6-12 months of bank account statement. This is done to verify your income and check your ability to repay the loan.
Income tax returns or Form 16 for previous 2-3 years – This lets the bank know that you are a regular tax payer.
Always compare your options well. Ask your friends or family, make Google your best friend, and then when you have all the information, compare the lenders and then make the clever choice. Also, make sure that you do not apply to many lenders as it can directly affect your Credit Score. Shortlist only one or two lenders who match your requirements and then apply to them.