Be very careful while conducting financial transactions as just a few errors on your part could make lending institutions hesitate to sanction the entire amount that you require to buy a house

How to safeguard your home loan eligibility

Be very careful while conducting financial transactions as just a few errors on your part could make lending institutions hesitate to sanction the entire amount that you require to buy a house

Have you ever delayed credit card payments for several months just because you are tied up with work? Or missed a car loan Equated Monthly Instalment (EMI) because you forgot to transfer funds from one account to the other? Well, in that case you might just find it difficult to convince lending institutions to sanction the entire amount that you require to buy a house. There are several aspects that can affect your home loan eligibility and while they may seem innocuous, they do reflect on your ability to raise funds at the end of the day. Decisive factors The actual home loan amount sanctioned by a lending institution is determined after taking into account many factors like repayment capacity, age, educational qualifications, stability and continuity of income, number of dependents, co-applicant’s income, assets, liabilities, saving habits, etc. Frequent defaults If you have a tendency to miss regular loan repayments or have a history of defaulting on credit card bills, most lending institutions will either sanction a lower amount than what you would be actually eligible for or charge you a higher rate of interest to make up for the higher risk involved. Eligibility perception Most of us know that an increase in home loan interest rates means having to pay a higher EMI. But were you aware that the rise automatically affects your home loan eligibility as well? While this fact may not register immediately, it’s really quite simple when you consider it step by step. Snowball effect The interest home loan rate goes up; therefore, your total repayment amount also increases to that extent. And since the only thing in the equation that hasn’t gone up is your income... your repayment capacity, based on which they calculate the eligibility amount, comes down slightly. Documents required Documentation required to avail of loans is fairly standardized across the industry. Some of the documents revolve around the individuals’ proof of income earned, taxes paid, current place of residence and other government certified documents that further lend credence to the individuals’ claims such as passport, ration card, voter identity card etc. Confidence crisis If you do not have a proper set of these documents in hand, the bank may feel that you are deliberately overstating your income levels. Again, in such circumstances the lending institution would play it safe and calculate your eligibility based on a lower income level Even proof of age is important. Since the home loan has to be repaid before your retirement age, so the institution may only agree to fund you for a shorter repayment period of five or ten years, instead of the standard 15 or extended 20 to 30 year tenures. Again, this will hike up the repayment equated monthly instalment (EMI) amount and if the institution feels you cannot comfortably repay the amount borrowed at your present income levels, the total loan amount sanctioned will obviously reduce. Comprehensive paperwork In addition, there are various documents required from the builder or society as the case maybe. Again these are fairly standardized documents designed mainly to protect the borrower from buying into illegal constructions or disputed properties. These too need to be in order for a proper sanction. Valuation concerns If you are seeking a loan of Rs.5 crore for an apartment that has a market value of Rs. 4 crore, it is again likely to make the bank a bit suspicious. Since banks tend to lend around 70 to 75% of the total cost, there have been several instances where people who do not have the ability to raise the balance amount, apply for a loan with an overpriced agreement. Their rationale is that getting 70% funding on the inflated price will cover most of the gap that they would have needed to fill with their own savings. Sanction process However, do keep in mind that banks will evaluate the value of a property as well before sanctioning the home loan. Even if you may be financially eligible for a loan of Rs. 5 crore, the valuation of the property as per their estimates, needs to be high enough as well. So ensure that you do not try to finance an overvalued property with a home loan or you may just find the sanctioned amount to be lower than your expectations. The bottom line is that you need to exercise a great deal of prudence and have a systematic approach in order to get a home loan sanction for the amount that you require. docs required for home loan     paper required for home loan     home loan required     papers required for home loan     required home loan     home loan requirements     income required for home loan