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What a bank looks into before approving your home loan application

After deciding on your dream house, the next big task is to get approval for your home loan. In order to check your financial credentials, the bank asks for the umpteenth number of documents ranging from your payslips, form 16, appointment letters, relieving letters, among others. But the approval process does not end up with providing those required documents, as banks start evaluating your application only after submitting all the documents. Here are some of the most common things banks look at before approving a home loan.

Credit history

Credit history tells the status of your financial health and banks always look for people with clean financial reports. It is for this purpose banks examine your credit scores where anything between 700-800 is considered good. While a score of less than 700 denotes bad financial condition a score of less than 300 could lead to rejection of your loan application.

Age

It is easier to get a loan when you are young compared to people above 60 years. Experts say banks prefer borrowers between 30 to 50 years of age as they have higher income and a sufficient number of working years left to repay their loans.

Occupation

Here the bank evaluates how sound the company is where you work, as an occupation is one of the important parameters while evaluating a home loan application. It is, for this reason, it is easier for government or PSU employees to get loan approval compared with people working in small private companies and self-employed people. If the company delays payment of salary then it can weaken your case for loan application.

Property distance

Banks usually give loans for projects that are internally approved and have required clearances in terms of title, legal, environmental factors, among others. Lenders may also not want to fund projects that are very far, as distance of the property may be considered by a bank while financing a house.

Experience

Banks look for your financial stability, hence people working for more than 10-15 years are preferred. People serving for long in one company also get an advantage over others.

Bank customer

If you are an old customer of the bank then chances of getting a loan are higher, as the bank already knows about your financial history.

Debt to income ratio

Banks prefer people who are not overstretched and have enough surplus as chances of default are much lower in such cases. Banks generally prefer a ratio of not more than 30-40% when it comes to home loans.