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Are You Eligible For A Home Loan? 3 Factors All Lenders Must Consider
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All lenders have a list of factors they keep in mind when considering an individual’s home loan application. All applicants do not get their applications accepted. The reason being that, financial institutions only provide loans to applicants who have the ability to repay them on time. The three most important factors that a lender must consider then reviewing a home loan application are:
1. Credit history
A factor that all creditors keep in mind when considering an application is the borrower’s personal as well as business credit. One should always obtain their own credit history before applying for a loan to see what can be done to improve the score if it is low. A bad credit score arises due to consistent late payments and defaults on loan repayments. Creditors avoid offering loans to such applicants as they cannot be relied on to repay the loan provided on time which is a major loss for the creditor. Hence, an applicant must take steps to ensure they have a high credit score.
2. Ability to repay the loan
All creditors require an applicant to provide documents about the amount of salary they earn. An applicant is required to provide documents about his monthly earning to check whether or not they can afford the loan or not. The purchase behavior of an applicant is also taken into consideration. The reason being that even if an applicant earns a reasonable salary if they spend most of it each month they will still not be able to afford the loan. Applicants must try to reduce their monthly expenditure to accommodate the loan repayment. One can also use a home loan eligibility calculator to find out how much loan amount they are eligible for. This can help one plan their finances in advance to ensure no default occurs.
For most loans, creditors require the applicant to provide collateral. In the case of a home loan, the house purchased is usually put in as collateral by the applicant. This means that if a borrower for certain reasons cannot repay their loan, the financial institution can seize the house and sell it to get back the loan amount. It is for this very reason that an applicant must plan their financials in advance to ensure that no default causes the bank to seize their house.
Applying for a home loan is a decision that must not be taken lightly. It is for this very reason that banks suggest customers to make use of the home loan eligibility calculator provided to find out the loan amount they are eligible for. This allows one to start saving in advance and make a plan to help repay the EMIs each month on time.
Author Bio :
The author is a seasoned writer on finance topics and she articulates aspects that are important to people availing the home loan facility. She writes about a variety of topics covering the home loan documents, rates & the uses of home loan eligibility calculators that help to make the best decision.
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