29 June 2011
How Much Loan Amount can I Borrow for my Home Loan?
Ever wondered what would be the criteria for home loan approval and how much amount would the loan be sanctioned for? You can always dream of a bungalow or a duplex flat and since home loans are available easily you feel you can get the amount required as loan. Well this is not true for all cases. Let us understand the point of view of the lender who offers home loan to the borrower and how do they calculate the loan amount that can be offered as loan.
Each individual has different pay scales and also every family has different expenses and monthly requirements. The home loan lenders usually go through your credit card score and your incoming pay checks proofs to get a hold of the total amount of money available for you. Monthly expenses could be understood by your lifestyle and needs of other members, along with the number of dependents in the family. Your spending habits will indicate how much you can save monthly, and your trans union score from cibil will make your financial standing clear.
Even when all these documents are in place many times we notice that one individual has got the home loan for a larger amount approved whereas his counter part who his working in the same place has got a lesser amount approved as home loan. Here the most important criteria for the lender is to keep a check on the monthly income or total incoming finance of the individual. Usually an EMI would come up to not more than 50% of the salary, or the total income. According to this figure the lender will calculate the home loan amount offered.
Even if you have a good income there are certain basic calculations that a lender goes through before offering a loan. Suppose you have other loans then some amount will also be spent as EMI for repaying that loan. Let us take an approximate figure of say, 10%. Your monthly expenses would come up to say, 20 to 25% of your income. And also considering some investments like insurance policies, funds and other bank commitments we say, about 20%. This leaves us with about 45 to 50% of your salary. This is a judicious combination and calculation for financial planning. This criterion is taken as your repayment capacity and the total amount of loan offered will be with consideration that you can repay the monthly EMIs easily.
By keeping this in mind the borrower can consider only those housing projects that come up within their budget. And apply for home loans in this range of amount only for better chances of getting your loan approved. Your other assets and investments do play a major role in your loan approval so also the place where you work and your position. Though this seems all but natural that you would select a bigger home and finalize a large sum as home loan, it would be better if you assessed your requirements first. Precious money remaining from monthly expenses can be diverted as other investments and increasing your other assets. It would be wise to take what you can manage easily on your platter as loan to avoid long term stress and as we all know the lenders are out there to offer large amounts as loan, as they get high profits in terms of interest, but the borrower has to be critical in narrowing the figure of amount as home loan, as they have to repay the loan with interest, and that too on time!.