Score well to get a home loan- Business News

How to score well to get a home loan?

Different banks have different scoring models for approving loans. The key points banks consider before approving a home loan.

  • January 25, 2016  
  • |  
  • UPDATED   17:08 IST
Home loan
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Credit history

  • Banks prefer people with clean financial records. For example: If you default on credit card payments, it will look bad on your application.
  • Banks check your financial status through your credit report, which is maintained by different bureaus.
  • The approval of your home loan application depends on your credit score-800 is considered the best score by a bank. Anything between 700-800 is considered good. If your credit score is less than 300, the bank may deny you a loan.
  • High credit score does not translate into low interest rates. It just helps you to get a loan faster.
  • Occupation is an important factor while appraising a home loan. A company with a poor history of paying salaries can weaken your loan application.
  • Similarly, if you switch jobs frequently, it gives a negative impression to the lender.
  • A few banks, especially government banks, prefer to give loans to government or PSU employees over people working in private companies, businessman and self-employed people.
  • People between 30 and 50 are most preferred by banks as they have a good number of working years left to repay their loans.
  • People above 60 years of age are scored low by most of the banks.
Location of the property
  • Your property should have required clearances in terms of title, legal, environmental, among others.
  • Remote location can make it difficult to get a loan.
  • Distance of the property from the financing branch is also considered while sanctioning a loan.
Work experience
  • The longer your working life, the more points you earn. So 15 or more years of service will be preferred over someone with 10 years' experience.
Repayment period
  • The shorter the repayment period, the more preference you will get from the lender. The score lowers down to half for repayment period between 10 and 15 years compared to loan repaid within five to 10 years. And is the lowest for a payment period between 15 and 20 years.
Relationship with the bank
  • Banks value their old customers. They know your financial history, hence prefer you over new customers.
Purpose of the loan
  • You earn more points if you are buying a ready-to-move-in property. Under-construction properties earn to fewer credit points.
Surplus income
  • Low surplus conveys that you are financially stretched and chances of default are higher in your case.