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How Does Your Income Affect Your Home Loan Eligibility?
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Purchasing a home will no doubt, require strategic planning and decisions that one would need to take. In addition to this process, one would need to consider the different factors that can affect this loan application. Out of the different factors, income of the applicant is one of the most important factors. Here is how income will affect the eligibility of one’s application for the home loan:
Indication of stability
When one would require a home loan, one would also need to have the ability to repay the loan during the repayment tenure. This is only possible if the applicant possesses a stable income. A stable income can be in the form of employment or can even be derived from one’s business. This stability ensures that the loan would be successfully repaid especially during the long repayment tenures. When using tools like the home loan eligibility calculator one would need to input the income to know whether they are applicable for the loan or not.
Affects the debt to income ratio
The debt to income ratio indicates the ability for the applicant’s to manage any debt repayments. This ratio is normally calculated on basis of the applicant’s total monthly debt obligations which includes banking card payments and other additional loans against the net monthly income. This debt to income ratio also known as DTI ratio helps financial institutes digress deeper into the applicant’s ability to manage additional debt. If one has a low DTI, it indicated a stable balance between debt and income. The accept rate for this ratio should not be more than 40%.
Influences value of EMI’s
Knowing one’s income will help you plan the ideal EMI’s for a home loan application. The income alone may not be restricted to the applicant’s job or business alone. It can also include income from other investments like rental, mutual funds or even stocks. When one applies for this loan, one can use the income from these sources in addition to the income from the employment or business to decrease the EMI during the repayment tenure. This also allows you to input a higher value for income when using the home loan eligibility calculator, thus providing you with a higher chance of gaining a home loan.
Affects your position as a co – applicant
Home loans are calculated as per the requirements of a single income holder. However, the income for the applicant must be considerably high, to be applicable for the loan. If the income value is low, one can easily join as a co – applicant to the loan. This raises the income value higher in the home loan eligibility calculator. Thus, one has a higher chance of approval for the home loan through this process.
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 calculator that help to make the best decision.
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