If you are about to take a home loan, the most easily accessible financial supplement to purchase your dream home, it is time for you to find out how you can enhance your eligibility to apply for a home loan.
A prospective borrower has to go thorough stages of credit appraisal, a process followed by banks to determine the borrower’s ability to repay his loan as well as his trust worthiness, as practiced by different banks.
The loan eligibility is usually calculated by applying Fixed Obligations to Income Ratio (FOIR). Most banks restrict FOIR to a maximum 45-50% of monthly income. That means, considering that one needs around 45- 50% of his income for his personal expenses, all fixed obligations including the home loan applied for, should be restricted to a maximum 45-50% of his gross monthly income. The loan amount is sanctioned can be calculated as below:
Loan Eligibility = Gross monthly income * 45-50% – all other obligations / per lakh EMI (EMI calculated on the basis of applied tenure and rate of interest).
For the business class, banks will analyze the financial statements to see how the business has been faring for the past 2-3 years considering the ITRs, Balance Sheets, P & L Accounts (audited and certified).
Banks look into your credit history like existing loan repayments, mishandled accounts or delinquent credit cards. This can be checked through a database of past loans and repayments available with the Credit Bureau of India Ltd (CIBIL). You can learn how to access your CIBIL score from the following link http://www.cibil.com/accesscredit.htm. Cross checking of the income with documents like bank statements or initiating credit verifications is also part of the process.
Banks consider your income documents, personal credit history, current assets and liabilities, education, experience etc. before sanctioning a home loan.
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