What Does Housing Finance Company Look for While Sanctioning Home Loan

What Does Housing Finance Company Look for While Sanctioning Home Loan

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Every day, the financial institutions receive several applications for home loans, however, not all applications are approved only a few get the nod. This is because, the banks looks for several factors to ensure that the applicant is a safe bet. In this write-up, we provide you valuable information on what the companies look for.

For a large number of people applying for home loan is the most reliable way for getting funds for buying their dream property. However, not everyone gets their loan sanctioned; the authorities consider several factors apart from the applicant’s income and financial standing before approving the loan. If you are planning to apply for a home loan, you need to first know what are the criteria(s) set up by the lending institution that you would need to fulfill?  Some of the important things that most lenders look for are:

Credit history

Typically, the housing finance company tends to favor the people with clean credit history for loans. When you apply for a housing loan, the lenders do a background check on your credit rating as well as your past history to ensure you have the capacity to repay the EMIs on time and that you have no history of non-payment. Most banks and private lenders consider 800 as a good credit score, if your credit score ranges between 700 and 800, chances are high that your home loan application would be approved.

Occupation

Majority of the banks tend to have a biased approach towards certain occupation(s); for example most of the public sector banks would give more preference to the applications that are into government jobs as they ensure stability. Followed by government employees, next preference is given to people who work in blue-chip companies and then to the self-employed professionals like doctors, engineers and lawyers. People working in the private sector companies are given the least preference. Remember, this is not a hard and fast rule but most lenders consider occupation as important criteria.

Age

This is one of the most important factor that the lenders consider while assessing the home loan application. Generally, the lending institutions give preference to the applicants falling in the age group of 25 years to 40 years since they are considered to be financially more stable and sound. Also, they have a significant number of years behind them to repay the loan. On the contrary, people aged between 50 and above are considered to be risky propositions and hence, their chances of loan application being rejected are pretty high.

Repayment period

No lender wants to provide loans for a long time; the shorter your repayment period, the higher your chances are for home loan being sanctioned. Even banks cater more to the needs of those people who go for repayment tenure of five to fifteen years.

Relationship with the lender

If you have been a long and loyal customer of the bank, you have automatically earned yourself a few additional brownie points. Most lenders value their old customers and they are also quite familiar with your current and past financial status. A person who has been a loyal customer with the bank for over 10 years would definitely be give more preference over the person who has no past relationship with the bank.

Purpose

Banks give preference to applicants who are buying ready-to-occupy homes rather than the ones going for under-construction houses. This is because the under construction homes have the risk of the builder delaying the possession or failing to get approvals from the authorizing agencies. Similarly, it is much easier to get home loan for renovation than for buying a new land or constructing a new home.