The factors that determine home loan amount eligibility

Many of us plan to take home loan but don’t know the factors that banks take into consideration for fixing loan amount.

1. Age: Borrowers age is the most important factor. If the borrower is working in public sector and is closer to the retirement then the loan amount will be less. The reason is, the number of working years will be relatively lesser and the EMIs will be higher. This will increase the burden on the borrower therefore banks will taken into account the age of the borrower while deciding the eligibility.
2. Income: The monthly disposable income is the most important factor for loan eligibility. Usually the EMI is to be set in accordance to a fixed percentage of the applicant’s disposable income which will enable the borrower to repay the loan installments comfortably. This reduces the chance of default.
3. Source of Income: Before sanctioning the loan banks check the source of income. The borrower has a secure job or steady and assured stream of income if he owns a business. In case the borrower is unemployed or does not have secure job then in spell of unemployment it would be difficult to keep up the EMI payments.
4. Securities: In case the borrower is not earning good salary but his financial background is strong this will also help him in getting a higher loan amount. If the borrower has other securities such as fixed deposits or good amount of insurance, this also helps in getting a higher amount of loan. If the borrower’s repayment record is good then also bank tends to offer a higher amount.