Buying a house is everyone’s dream and people go to great lengths, to get their dream home. The idea of a dream home although noble and inspirational can be at times cumbersome since there are certain processes involved as far as the lender is concerned, which we might not be aware of. We never know that what the banks are thinking and whether they would approve our Loan or not.
For some it can be quite a nerve wrecking affair, as they do not know what to expect. Huge investment needs to be done and for that you need a regular and stable income. You also need to research as to how and which type of home loans can be used.
Here we are going to tell you a few things on which the banks evaluate your home loan.
Documents – One of the first things that you need to provide to the banks are your documents. The bank is interested in knowing whether the property which you have chosen is legal. Once that is confirmed, the bank would then ask you to provide documents which will show the proof of your income, salary slips of last six months, and documents of Income Tax returns of last three years. Other documents which will be seen, are date of birth, present address, PAN and bank statements.
Income Debt Ratio – At the time of taking the loan if you have any other loan you must declare it. The lender must make sure that the Income Debt Ratio of the individual should be acceptable. In order to be on the safer side if your Income to EMI ratio is more than 50 % then there are chances that the lender might view your income debt ratio negatively, which in turn will lead to denying of your loan.
Suppose a person is earning 1 lakh per month and has a loan EMI of Rs 20,000, then his income debt ratio is 20%. The lender will estimate that the person’s borrowing capacity is Rs 50,000, which is half his salary. Due to this the total EMI that person can afford is Rs 30,000. By using the EMI calculator we find out that the amount which is sanctioned to the person at 10% for 20 years will be 30 lakh. And if his documents are approved then he will get a loan.
Credit Report and Score – You might have a high credit score and good credit history and high income, but if you do not have manageable debt levels, then getting a loan might not be that easy. Lenders will usually give out loan to those borrowers who have a high credit history and a healthy credit history.