Home Loans: What are the factors that lenders consider while approving loan applications?

Buying a new residential property is considered a good investment option however; it has turned out to be quite expensive in today's fast-paced world. One requires doing a lot of budgeting and planning before buying a new house. An efficient and easy way to buy a new property could be to avail a home loan.

Many Banks and finance companies have been providing a series of loan options for people willing to buy new home buyers.

As home loans involve large sums and have extended payback terms, they come with certain strict eligibility criteria that banks evaluate before approving the loan applications. A number of factors are taken into consideration while assessing a housing loan application.

From income status to ongoing loans and credit score, a lot is evaluated by lenders before releasing the loan amount. If you're also planning to avail a housing loan, here are the important factors you should consider before finalising the loan offer.

Factors that lenders consider while approving home loans

Income status: One of the most important and foremost things that lenders evaluate before sanctioning a loan is income status. Since there is no collateral, banks will be eager to know that you have a decent income, along with a surplus income.

Occupation: Along with income, a person's occupation is also scrutinised by lenders before providing a loan. While people working with blue-chip companies or those working in finance, investment banking, and engineering fields, for instance, are mostly taken into consideration, those working in private firms or self-employed applicants get relatively less preference.

Credit score: Having a good credit score is very important while applying for a loan as it displays a person's past credit reports and ratings, followed by details about any EMIs, credit card payments, due balances, and other pertinent information.

Existing loans: In case a person already has an existing loan, the home loan eligibility will come down. Preference is mostly given to those who don't have any pre-existing loans, as the borrowers are more financially independent.

Age: Age is also an important factor that financial institutions consider while sanctioning home loans. Usually, banks give more preference to candidates between the age bracket of 30-50 years for home loans.