Approval or rejection of home loan applications by the bank depends on a number of factors that may range from the relationship of the applicant with the bank and the reputation of the builder. Many banks also have other parameters which they look into before approving a home loan or any other loan. While evaluating a loan application, for when they evaluate your loan application. Banks need to make sure you’re likely to repay a home loan according to the terms of your mortgage agreement. In making this assessment, they consider a variety of factors related to the applicant’s past and present financial situation.
Sometimes referred to as FICO score, a healthy credit score is one of the important parameters for getting loan approvals. Generally banks prefer borrowers who have a clean financial habit. The number between 300 and 850 helps banks and financial institutions get a handle into the applicant’s credit history.
Using credit score, banks and financial institutions can determine the status of the loan applicant. A figure lower than the said range means that the individual is a risky borrower and banks usually reject loan applications from such people. The higher the credit ratings, the better chances a bank may consider the loan application.
Age is another factor that banks determine before giving a loan. Banks generally prefer people falling in the age group 30-50 years as they are considered to be financially stable.
Banks also have a preference for the applicant’s occupation. Jobs in government banks, government and PSU offices are considered stable and their employees are preferred more than others. Next in line of preference are doctors and employees working with blue-chip companies. Down the line lawyers, engineers and chartered accountants are preferred by banks and financial institutions. The lowest preferred are self-employed and employees of private companies Banks also check for salary packages and frequency of job switches.
Banks and financial institutions offering loans also check for the applicant’s work experience. The applicant should be working in a company for at least three years. The higher the experience, the better it is for quick loan approvals. An individual frequently switching jobs spells bad news for banks.
Banks also check the applicant’s purpose of the loan. Buying a ready-to-move house will earn the borrower brownie points over an under-construction project. Since there are chances of the project getting delayed or in worst cases, stalled, banks usually don’t approve such applications. It is easier to get approvals for repairs or renovation in comparison to house construction or land loan application.
Banks generally prefer borrowers who opt for shorter repayment tenures. The best bet to get a loan approved quickly would be to shorten the repayment period.
In case of joint loan, the bank always checks for the spouse’s income. Eligibility for home loans and repayment capacity especially increases if it is a joint loan, depending on the co-applicant’s income. Both the applicant and the spouse’s income will be taken into consideration while determining the loan repayment period.
The borrower having surplus income after paying EMIS also spells as a deserving candidate. The loans get approved faster if the bank feels the applicant is financially stable even after clearing the EMIs.
Banks also value long-term relationships with customers as one of the parameters for approving loans. Keep these points in mind when you apply for a loan at any bank or financial institution.
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