Knowing the minimum mortgage criteria will help you narrow down your options for an HDFC Home loan if you’re looking for a house. Homebuyers eligible for a mortgage will be able to borrow more money in 2022 due to increased loan limits. On the other hand, lenders will have to adapt to shifting market conditions as interest rates rise and housing values rise with it.
If you want to acquire a loan from any lender, you’ll first have to complete the requirements. Check out some of the most essential aspects that lenders consider while deciding whether or not to lend money to a borrower.
- A person’s credit score
Credit scores, which vary from 300 to 850, are based on information found in a person’s credit report and include things like the amount of credit issued, the length of time the account has been open, and the amount of credit currently being used. Credit scores of 580 or more are required for a home loan, although most lenders want higher credit scores. The better a borrower’s credit score is when they apply for a loan, the cheaper the interest rate is expected to be, all other things being equal, regardless of the lender’s minimum credit score.
- Your debt-to-earnings ratio
Debt to earnings measure how much debt you owe compared to your monthly or yearly income and it includes your monthly interest payment. If the monthly housing, automobile, and student loan payments amount to Rs. 30 lakhs and you earn Rs 1 Cr annually, then the debt-to-income ratio is considered to be 30%.
Under schemes provided by the GOI, the criteria for debt-to-income ratio (DTI) are comparable to conventional lending regulations. A loan under the PM Awas Yojana normally permits you to borrow up to 60% of your gross monthly income without exceeding the guidelines for debt-to-income ratios. A more significant DTI isn’t always an automatic disqualifier, though. You can still get a loan from the various lenders even if your debt to income ratio is more than 60%, but you’ll need to show additional evidence of your capacity to repay like a different source of income like rentals, or collateral.
There are two ways to get out of debt: you may either go ahead with a lesser loan amount on a cheaper property, or you can focus on getting your debt under control first.
- A down payment
Lenders require to pay down payments to ensure that you are interested in the property you’re purchasing. To protect the lender, you must repay the loan in full as quickly as possible. Failing to repay your HDFC Home loan may result in a loss to the lender due to payment defaults, penalties for selling the property and probable decrease in the value of the property under mortgage.
You should keep at least 20-30% of the home value as down payment and borrow the remaining while purchasing a home. Despite this, many people find it difficult to contribute significantly towards the down payment. Under the present scenario, any lender may require at least 30% as it is mandated by the regulatory authority; in special cases, the down payment can be as low as 20% for exceptionally qualified applicants with higher income slab.
- Your work history
In order to ascertain the borrower’s employment status, lenders require a proof of employment whether it’s the letter of appointment, pay-slip, monthly bank statement or any other. For all the borrowers regardless of whether they are applying for a conventional loan, under PM Awas Yojana, or under the armed forces quota. As per the norms issued by the Reserve bank, a borrower’s regular income and minimum two years of employment is mandatory and is required as proof points for all the lenders. In case of a disability, proof of income with source and other benefits may be necessary for the absence of jobs.
- The home’s value and condition
Last but not least, lenders wish to know if the home you’re buying is in good condition and worth the cost you’re paying. To ensure that you don’t wind up in a lousy deal with the cash you borrow, a lender will usually need an examination and an assessment. If the house inspection reveals severe faults, the loan will have to be refinanced. Your home’s assessment also determines how much you can borrow.
If the property is worth less than what you are paying for it, there is no convincing reason for a borrower to overpay. In such a case you can negotiate the price or cancel the deal if needed. Your purchase agreement should clearly state that you can walk away from the arrangement if you are unable to secure financing.
Securing an HDFC Home loan requires several factors to come together. You’ll be one step closer to becoming a homeowner once you’ve organized your finances and gathered the required paperwork.