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10 August 2011

Loan Eligibility Criteria- Meaning of Monthly Income

The loan eligibility is based on two very important points. The amount of loan repayment that you can afford, and the percentage of the total cost of the property.  Your total income and expenditure will be the major criteria for approval of your home loan.  Since rates of property are at a very high rise the cost approximately of a house comes to about 45 or 50 lakh till a crore or more.  If the individual earning about 50,000 Rs per month will calculate his loan approval amount the lender company will calculate his total incoming and outgoing money.  If his expenses are about 15 or 20,000 per month and then some amount from the 50,000 kept as security for unexpected expenses, the remaining amount of approximately 15 to 20,000 Indian rupees will remain.  Now this amount can be calculated as EMI amount for loan repayment.

Lenders are willing to offer loans of large amounts to individuals at a predecided interest rates.  In so many places we have mentioned the income of the borrower as an very important criteria for selection of approval of your home loan.  What exactly does the income mean?  When we mention the income of an individual we realize that this will be the total amount of money coming in every month.  Now, many individuals would like to show an increased salary by accommodating allowances, over time money, traveling allowances, medical reimbursement, gift vouchers and other allowances which do not have a regular document or proved to be a monthly income amount. Since this amount is not a fixed income and also depends upon the company rules many lenders avoid calculating this as the income of the borrower.  Hence they only considered the salary slips that can be shown by the borrower is a regular and fixed source of income every month.

Now this would be considered in a positive manner as the borrower would only taker home loan for the amount that is his regular income.  The other money coming every month can be kept as standby for emergency expenses or other investments.  This will also encourage the borrower to be in a limit and only purchase a home according to their repayment capacity.  All this is important because many times it is seen that there is a tendency to purchase a larger house then their requirement which very often leads to  higher EMIs and stressful repayment over the years.  This may sometimes come as a disadvantage because even though you have and increased amount of incoming money you are not eligible for a higher loan amount.

Though home loans are any easy way to fulfill your dream of purchasing a dream home it must always remember that home loans are definitely expensive and you end up paying a much higher rate of interest over the years.  The property rates calculated according to area per square feet would give you the total cost of your home.  But when you purchase a home on loan you are paying a higher amount as interest along with the principle amount.  Hence it would be best to take a smaller loan and paying a larger amount as down payment in the beginning.

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