The lender has to assess your financial health before it decides that you are mortgage worthy. Further, it’s a sizable amount to be repaid over the long term by you and the lender must know that you will be able to service your loan diligently through the tenure.
In order to judge your creditworthiness, your prospective lender will therefore ask you to submit a host of documents. The following are the documents you need in you home loan application file.
Putting together these documents may seem like an arduous task to you, but do go through the documentation process properly to ensure that there are no gaps from your end that may be the cause of your loan application getting rejected.
When you are comparing lenders and checking out home loan options, you should not only look at interest rate comparisons but also the various other fees and charges. Some of these charges need to be paid upfront while you are taking the loan while other charges are levied during the tenure of your loan. While negotiating with lenders, you should have a clear idea about the various other charges so that you can negotiate well and get the maximum benefits. Here is a checklist on charges that will come in handy when you are shopping for a home loan:
While shopping for your home loan, you must clarify and negotiate on each of these charges with your lender, so that there are no nasty surprises later.
The standard method banks use to assess your home loan eligibility is the application of FOIR (fixed obligation to income ratio) of a borrower. To calculate the FOIR, the lender takes into consideration all the other monthly instalments a borrower is paying including the home loan that he has applied for. However, the statutory deductions from your salary like provident fund, insurance premium payments are not taken into consideration in this calculation.
Suppose the income of a prospective borrower is Rs 50,000 per month.
He pays a car loan EMI of Rs 8,000 per month
He has just bought a gadget and pays an EMI of Rs 2,000 per month for the same
His proposed housing loan installment is Rs 15,000 per month
When all his loan installments are divided by his monthly income, the FOIR is 50% or Rs 25,000
Most lenders restrict the FOIR limit to a maximum of 50% of one’s monthly income. It means that if one needs around 50% of his income to meet his personal expenses, the other half is committed towards fulfilling his fixed obligations, including the home loan.