Home loans are the most easily accessible financial supplement to purchase your dream home. To understand how to enhance your eligibility to apply for a home loan, make a simple self-assessment. Here is how banks do it.
Credit Appraisal is the process followed by banks to determine the borrower's ability to repay his loan as well as his trust worthiness. A prospective borrower has to go thorough the stages of credit appraisal as practiced by different banks.
The main factor banks will consider is "proof" that shows that the borrower is capable of repaying the loan on time. For this, they will look into your income documents, personal credit history, current assets and liabilities, education, experience etc.
Old generation banks and co-operative banks to certain extent rely upon existing relationship or the previous experience with a client. A common pattern they follow is the sanctioning of a loan amount which will be a fixed multiple of the annual income. However, the new generation banks strictly follow their parameters.
The loan eligibility is usually calculated by applying Fixed Obligations to Income Ratio (FOIR). Most banks restrict FOIR to a maximum 45-50% of monthly income. That means, considering that one needs around 45- 50% of his income for his personal expenses, all fixed obligations including the home loan applied for, should be restricted to a maximum 45-50% of his gross monthly income. The loan amount is sanctioned can be calculated as below:
Loan Eligibility = Gross monthly income * 45-50% - all other obligations / per lakh EMI (EMI calculated on the basis of applied tenure and rate of interest).
For the business class, banks will analyze the financial statements to see how the business has been faring for the past 2-3 years considering the ITRs, Balance Sheets, P & L Accounts (audited and certified).
Banks look into your credit history like existing loan repayments, mishandled accounts or delinquent credit cards. This can be checked through a database of past loans and repayments available with the Credit Bureau of India Ltd (CIBIL). You can learn how to access your CIBIL score from the following link http://www.cibil.com/accesscredit.htm. Cross checking of the income with documents like bank statements or initiating credit verifications is also part of the process.
| Our basic needs are: Air, Water and Food. |
| Recent Articles : |
No comments:
Post a Comment