Most people find it extremely difficult to purchase their new home without getting a loan approved by the traditional banks. However, one important thing that you have to understand is that the approval of the loan is not an easy process. Most people do not even know about the things that are required for getting the bank to approve the home loan. Banks have the freedom of rejecting home loan applications because of several factors, depending on the credit history, the credit score, the builder’s reputation, the location of a particular property, and most importantly, the relationship that you share with the bank.
At certain times, two people who have similar credit scores can discover various outcomes associated with the application of home loans. Few banks have the option of internal scores, which are used for understanding whether a particular person is eligible for the real estate investing loan. Given below is a list of the common factors that banks prefer looking at before approving home loans:
The Credit History
Banks prefer lending money to people who are known to have clean financial habits. Credit scores are responsible for telling several things about the current financial health. Whether you are paying your EMI on time or you have defaulted can easily be checked through the credit report. This credit report is normally maintained by several bureaus. Generally, a credit score of 800 is considered to be the best score. However, if the score is less than 300, the application for a home loan can be rejected. You can get your loan approved in a fast and hassle-free manner if your credit score is great. One way to have great credit is to pay your credit card bills on time. Also, a good credit score means that the lender will pass your home loan without any extra doubts.
Occupation
Certain occupations are preferred by the banks. For example, government employees are given priorities because the job that they have is stable. After the government employees, banks prefer those people who are associated with blue-chip doctors and companies. Next, lawyers, engineers, as well as accountants are preferred. Also, people who are working in private companies as well as are self-employed get low scores.
Occupation is undoubtedly one significant factor that is considered when a home loan is upraised. This factor is important because the repayment capacity is dependent on the amount that a particular person is bringing home. For instance, if a particular person is associated with an organization that does not have a great history of clearing salaries as well as dues to employees, the home loan application will be weakened. Similarly, any borrower who is switching jobs often is giving a negative impression to the bank. Also, all the applications will be treated in an equal manner, whether the applications are of government employees or employees associated with private sectors.
Age
Age is an important factor, which banks consider before giving home loans. People belonging to the age group of 30 and 50 years are preferred by banks because they are financially stable in comparison to the other age groups. Also, they have several years left in their job, which will help them to repay the loans. Similarly, people who have already crossed the age of 60 are responsible for faring the worst when it comes to the internal scores of the banks.
Distance
Another important factor that banks consider is the distance of a particular property from the financing bank branch when sanctioning loans. For instance, as stated by the banks of the public sector, properties within city limits or the town are given more importance. Alternatively, if any property is situated far away, banks hesitate before approving loans.
The Work Experience
When you visit the bank, you are going to see that the lenders will ask an important question. The question is for how long you have been associated with the current organization that you are working for. The reason behind this is that if you serve for a long time, you are going to earn more points. For instance, people who work for more than 15 to 20 years will be preferred in comparison to those who have experience of 10 years. Banks normally prefer people who are serving in organizations for 3 years, as stated by www.businesstoday.in.
The Income Source Of The Spouse
The eligibility of a home loan is also highly dependent on the income of the co-applicants. For instance, if you are interested in purchasing a costly property, the bank will be responsible for funding only 80% of the entire cost. If your total income is not capable of supporting the loan burden, you are going to look at houses that are not as costly. However, if your husband or wife is working, their income is also going to be considered for determining the repayment capacity. Therefore, if both of you are earning enough, you will not face problems when you are applying for a home loan. You can visit the website of https://www.libertylending.com/ to know more about this.
Relationship With The Bank
If your relationship with the bank is old, there is a high chance that your loan is going to get approved. Banks value old customers because they already know about the financial past of these people. People who have been a customer for more than 8 to 10 years will be preferred in comparison to people who do not have any relationship at all.
Purpose Of The Loan
You have the option of earning more points if you can purchase houses that are ready to move into. Houses under construction are considered to be risky because the builder can delay possession or can fail to get approval from several government agencies. Also, it can be extremely difficult to receive approvals for those homes that are under renovation or repair.
Surplus Income
Your bank is going to love it if you have enough income after you clear all your existing EMIs. A low surplus is responsible for conveying that you are stressed financially and can default. Therefore, when you have extra income, your bank is going to love it.
Conclusion
It is important to understand why your home loan is taking so much time to get approved. Make sure that you are aware of all the factors that your bank is going to consider when approving the home loan.
