Know the eligibility and interest rate before availing home loan in 2021
The real estate sector was probably one of the most adversely affected industries due to the economic crisis of 2020 and interest rate. With residential properties contributing to 80% of the sector’s growth, a sharp decline in housing sales value was reflected in the industry’s overall downfall. However, the third quarter of 2020 saw a remarkable rebound with 2.3 times rise in housing sales value compared to the previous quarters.
This was primarily made possible due to the RBI’s reduced repo rate and subsequent home loan and loan against property interest rate reaching an all-time low. As similar benefits continue well into this year, here is a list of eligibility requirement and information on home loan interest rates to help home buyers avail of the greatest savings.
Mandatory home loan eligibility criteria
Leading HFCs require applicants to meet the following eligibility criteria to qualify for a home loan.
- Age: Applicants must be aged between 23 and 70 years.
- Employment: Individuals should have a constant source of income from a job or a business.
- Experience: Self-employed individuals must have a business vintage of minimum 5 years with profit. Salaried individuals should be associated with their current employer for at least 3 years.
- Citizenship: Applicants should be residing citizens of India.
The requirement for home loan eligibility and documents also involve individuals submitting:
- KYC documents.
- Proof of residence.
- Recent passport-sized photographs.
- Employment or business ownership proof.
- Financial documents like bank details, ITR, salary slips, audited profit and loss statements, etc.
Make sure to keep all the above-mentioned documents handy, besides additional lender-specific paperwork to facilitate seamless loan approval and disbursal.
Home loan interest rates and other charges
Interest charges constitute a remarkable part of your home loan EMI. This is why it is extremely important to decide on an interest rate best suiting your affordability. As already mentioned, the Reserve Bank of India has been bringing down the repo rate to boost commercial activity amidst significant cash crunches. The current repo rate remains unchanged from last year at 4%.
An all-time low home loan and loan against property interest rate makes this the perfect time for potential homebuyers to execute their plans. Besides interest, borrowers must also be aware of the additional fees charged by their lender.
These include processing charges that can constitute up to 3% of the principal amount. Other costs include documentation fees, prepayment charges, etc. Individuals can opt for a suitable home loan amount, depending on the total borrowing cost involved.
How can you enhance your housing loan eligibility for reduced interest?
Once aware of the lender-specific qualifying criteria and available home loan interest rate, applicants can cross-check their eligibility and boost the same to negotiate for lower rates in the following ways.
- Ensure a high CIBIL score: The primary determinant of an applicant’s creditworthiness is his/her credit score. Financial institutions are likely to sanction home loan to candidates with a 750+ CIBIL score, which can be enhanced by practising healthy financial habits. These include making timely repayments and avoiding defaults.
- Apply for a joint loan: A quick way to enhance eligibility is by adding a co-applicant with a higher CIBIL score and income. Applicants can also avail of additional discounts in case the co-applicant is a woman.
- Include all income sources: if you have any additional source of earning besides your primary job or business, do not hesitate including it in the application. A higher income suggests better repayment capacity and HFCs tend to offer lower housing loan rates to such individuals.
- Select properties with high value: Creditors are more likely to invest in properties in easily accessible locations and high resale value.
Additionally, it is advisable to open an account with your choice of creditor beforehand to establish good terms with them. This will aid in faster approval and help you enjoy lower home loan rates.