Hey,

We did think a lot about what the first chapter should be as a part of Digital Loan Series. Since we wish to connect with you, enlighten you and bring you more transparency so that you can be loan ready anytime, we thought of identifying your personal data.

The data that is very personal to you but the banks do care to ask!

The data that you own but you might be unaware that all these data will be of importance at one point of time!

The data that builds up your credibility to ask for money!

This first chapter of this Digital Loan Series is addressed to you with the primary focus on identifying your personal details required to avail a home loan in India. Your personal financial credibility matters to a good proportion while approving your home loan request.

One should be well informed before you even consider applying for a house loan. The borrowing credibility takes time to build up and to ensure that you can borrow anytime from any lender, but you need to be loan ready!

The Digital Loan Series is an educational chapter series to enlighten the points that will make you loan ready. This will highlight the positive and the negative aspects of the inside stories of borrowing for a home loan.

The following list emphasize on your important personal things that banks/lenders consider (and you must be aware of before time):

1. Your Earning Capacity

How much do you make every month? Certainly, no one likes to answer this question to anyone but you have to answer this before the lenders. They would like to drill down into details of your earning capacity. Your earning growth as well. This is required for matchmaking your repayment potential to your loan ask value. If your earning capacity is way lower than the ask value, then there might be some red flags.

2. Your Credit Score

This is “crucial”. By credit score, the lenders want to know how responsible you are with your payments. Do you repay your borrowed money on time? Or, are you a defaulter? This is to make a sure probability on your legitimate borrowing capacity. In India, you have a three digit bureau score between 300 and 900 that determines your credit health. Ideally, it is asked to maintain a 750+ bureau score to be eligible for a home loan. Make sure to check your bureau score in advance to apply for a house loan. In case, if you happen to be on the lower scale, try improving your score by clearing most of your debts on time and before your home loan application.

3. Your Credit History Age

While your bureau score is important, your age of credit history is equally important. Age of credit history is the average age of your open loan accounts. A longer age indicates you have more experience using credit.

In general, the longer your credit history, the more accurate lenders can be in determining the level of risk while giving a loan to you. If you have a long history of on-time payments and low credit utilization ratio, this gives green signal to the banks to approve your loan.

4. Your Financial Stability

Are you an employee or self-employed? This makes a huge difference. If you’re employed somewhere and have a regular source of income flow, this indicates that you’ll not be devoid of money unless and until any unforeseen situation arrives. This helps the banks to determine your risk potential.

But if you’re self-employed, then the banks take a longer time to approve the loan. In such a case, they drill down a little more to identify your business debts, other personal debts, as well as your earning forecast.

A good maintained bank account statement of over last 3–12 months can help if you are self-employed. You just have to ensure to the banks that you will not go out of money.

5. Fixed monthly obligations

It’s great if you can show a regular source of income. But there is more to it. You also need to show proof for your fixed monthly obligations. This means, with your earning capacity, how much are you spending and where all are you spending. Do you have any other loans such as any personal loan, any business loan, or a car loan?

This data helps the lenders to determine your repaying ratio out of your monthly income. It is advisable that you pay all other debts before you apply for a house loan.

5. Fixed monthly obligations

It’s great if you can show a regular source of income. But there is more to it. You also need to show proof for your fixed monthly obligations. This means, with your earning capacity, how much are you spending and where all are you spending. Do you have any other loans such as any personal loan, any business loan, or a car loan?

This data helps the lenders to determine your repaying ratio out of your monthly income. It is advisable that you pay all other debts before you apply for a house loan.

6. Number Of Dependents On You

This falls in a subtle way under the fixed monthly obligations. The number of dependents determine your monthly financial commitments to them. This also helps in determining your repaying ratio out of your total monthly income.

If you have lesser number of or no dependents, your loan to income ratio will be higher.

7. Your Age

Are you a sweet 16? Well, you can’t be a minor! This is so obvious.

Even though if you fall under the eligible age for the house loan, the younger you are, the more you can borrow. Yes, this makes a huge sense.

Because the younger you are, the more years you have to repay your loan. But, the older you are, you have lesser years to repay your loan. Your age plays an important role in determining the amount that you can be granted.

8. Retirement Age

What’s your ideal retirement age? The young millenials are planning to retire by 40 but here the retirement doesn’t mean freeing yourself from your obligations. Here the retirement age means, till how long will you be earning and will be having a regular source of income (EMI burden has become an obstacle in Starting Up!..more on this in our Digital Loan Series)

If you are close to your retirement age, it is recommended that you apply with a co-applicant who is starting early in the job with a decent income level. This helps you in obtaining a long term of the loan (so that your EMI will be lesser) based on the co-applicant’s age.

9. Number of applicants for the house loan

Are you going to be the single owner of your home? Or, do you have a co-applicant? As mentioned above, having a co-applicant makes your loan term more advantageous for you.

You can have a maximum of three co-applicants for the house loan. In general, people tend to have two and in most cases, a joint ownership is recommended.

10. Age, Relationship and Earning Capacity of the Co-applicant

There are multifold benefits of having co-applicants for the house loan. If you are considering in near future, do include a co-owner.

• If the co-owner is younger to you, you will be granted a longer loan term as compared to your single ownership.
• If your co-applicant happens to be your spouse, then you both can save extra on your taxes. More details will be unrolled soon.
• If your co-owner is working, you both together can get a max of multiplier of your combined net income capped by 75–90% of the cost of the home, to avail PMAY Scheme or First Home Buyers subsidy up to 2.35 Lacs and double taxation benefits(more of this in our coming series on subsidies and tax benefits)

These are the 10 broad-level important personal details. We’ll be drilling down more on your financial details required for the house loan in the next chapter.

If you happen to read this article, we assume you are somewhere in between of thinking for borrowing/purchasing a house. We recommend you to follow the series, or if you have any immediate query, reach out to us at social@whatsloan.com.

We also recommend you to share this with your people, your network, and younger ones so that they can be loan ready for the right time!