Purchasing a house is often a significant milestone and a cherished dream for many. It is also considered a personal achievement that marks the beginning of a new chapter. However, bringing this wish to life requires considerable effort. Applying for a Home Loan is typically the most effective method of making it manageable monetarily. It is a financial product that several banks offer.
It lets you borrow money for different purposes related to homeownership. The borrowed sum is subject to a particular interest rate, and you need to repay it over a fixed duration using equated monthly instalments. You can easily use an online House Loan EMI calculator to get an idea of this EMI amount. When you opt for a Home Loan, you should know that banks usually have specific eligibility requirements for offering this Loan to individuals.
Various factors influence Home Loan eligibility. One of these is the debt-to-income ratio. Let us better understand Home Loan eligibility, explore how the DTI ratio influences it, and consider the other factors that affect it.
Understanding Home Loan eligibility
Home Loan eligibility is the ability of a person to get a Home Loan from the bank. Multiple factors decide it. However, these criteria and factors might change based on the bank you choose to apply to.
DTI ratio and its influence on Home Loan eligibility
The DTI ratio is the proportion of your monthly debt payments with respect to your income every month. Banks usually determine this ratio to understand your repayment capacity. To increase your Home Loan eligibility, maintain a low DTI ratio. For this, pay off your current debts and avoid any new ones. This means you have enough income to cover your EMI obligations.
Other factors affecting Home Loan eligibility
Individuals can easily use a Home Loan eligibility calculator to determine their eligibility to get this Loan. This tool helps estimate the Loan amount you are eligible for. However, if you are wondering about other factors that influence your Home Loan eligibility, here are a few to consider:
- Credit scores
Your credit score reflects your financial credibility. Banks usually consider it a crucial criterion when evaluating your Home Loan application. A credit score of 750 or higher might boost your eligibility and help unlock better Loan offers.
- Down payment
It is the initial sum you pay towards the purchase price of the property. A higher down payment increases the Loan eligibility.
- Income
Banks generally have a minimum income criterion depending on where you work and live.
- Property details
You usually get a higher Loan amount if your property is worth more.
Conclusion
As evident, the DTI ratio and various other factors affect your Home Loan eligibility. Once you know these factors, you can check your Home Loan eligibility.
