Criteria banks use to evaluate home loan applications

Buying a dream house is an aspiration most individuals wish to fulfill in the course of their lives. The process involves a huge commitment of time, energy and, most importantly, funds. To make such a large-scale investment, proper research and preparation needs to be done.

Home loans help in making such an investment and, in the process, making the dream of owning a house come true for many. Therefore, it is important to understand how credit institutions evaluate home loan applications and what is required to ensure easy access to the loan.

Documentation

The first thing a lending institution seeks from you is the document detailing the house you are looking to buy. The institution wants to know whether the property you have chosen has all the requisite clearance from the local government. Once that is established, you will be required to furnish proof of income, at least six months' salary slips, last three years' income tax returns documents and other details like date of birth, present address, PAN, bank’s statements, among others. Make a checklist of the requisite documents and keep their copies ready along with the originals.

Income to Debt Ratio

It is important for you to declare if you are paying EMIs (equated monthly installments) on any other loan at the time of application. This is one of the deciding factors for your loan application. To understand how a loan application gets reviewed, here are two scenarios.

Credit Report and Score

To sum up, while a high credit score, strong credit history and high income will help in loan approval, they, by no means, guarantee one. Property Loan Interest Rate Having manageable debt levels also plays an important role. Lenders are always keen to provide loans and credit cards to disciplined consumers who have a high credit score and a healthy credit history.

The credit score works as a first impression for the lender, the higher the score, the better is your chance of the loan being reviewed and approved. However,

One must remember that the decision to lend is solely dependent on the lender and the credit information agency does not decide if the loan should be sanctioned or not.

It is crucial for every individual to improve their credit score and maintain it to ensure he or she gets credit when needed. One should pay all one's credit card dues and EMIs on time to avoid having a poor credit score and report. Not paying the dues on time can eventually lead to a bad score and your application for a loan stands a high chance of rejection.

[Source: http://economictimes.indiatimes.com/wealth/borrow/criteria-banks-use-to-evaluate-home-loan-applications/articleshow/53539534.cms]