A home is the symbol of ultimate financial prosperity and peace. While many of us aren’t financially prepared for buying a house in one go, we apply for home loan to realize the dream. But it isn’t as easy as it seems. Many home loan buyers don’t completely understand the essence of a housing loan process. However, thoroughly understanding this process is essential to buy your first home. They get enticed by the numbers, ignoring the fact that the lenders don’t know them by face, but by the financial history they provide; which is why terms like credit appraisal don’t make it to the mainstream. But we’ve got you covered! Let’s discuss what the terms like credit appraisal, CIBIL score and credit score mean and how they’re essential for making a well-thought easy home loan decision.
What Is Credit Appraisal?
Credit appraisal is one of the most significant aspects of home loans. It decides the borrower’s credit score when they opt for a home loan. In a nutshell, credit appraisal refers to the process of evaluating the credit-worthiness of a housing loan applicant. While every bank/NBFC has its norms and procedures for loan scrutiny, factors like the income source, assets, age, experience, income dependents, employment nature, repayment capacity and borrowing history are taken into consideration during credit appraisal.
In India, most financial institutions rely on the CIBIL score of a home loan applicant. This score is India’s topmost credit rating organization that rates individuals. It takes care of assessment of the borrower’s ability to repay a home loan by developing a credit report. The report outlays the borrower’s credit score; ranging between 300 to 900 points. These borrowers analyze your credit rating to assess your investment potential. 79% of borrowers can secure their preferred loan with a score higher than 750 – hence increasing yours to that limit makes you a worthy borrower in the eyes of most home loan lenders.
Why Is Credit Appraisal Crucial For The Home Loan Process?
The credit appraisal process helps both borrowers and lenders. It helps the lender to understand the borrower’s income & expenditure details, tax history, assets & liabilities, and previous loan records – based on which the lender analyses their home loan eligibility and repayment conditions. The bank/NBFC simply bets on the credit-worthiness of the borrower, and credit appraisal gives it trustworthy reasons to do so.
The borrower, on the other hand, refers to the lender’s credit appraisal report to understand own credit-worthiness. The credit appraisal process links desired conditions like home loan interest, principal, tenure, EMI, etc. to the credit score. Borrowers can use their credit rating to find and improve the activities that impact their ability to get a home loan.
Securing a home loan can be a distressing process, but not if you have a good credit score. Another thing to keep in mind before you apply for home loan is to use multiple home loan calculators such as home loan EMI calculator and eligibility calculator, so you can optimally assess your EMIs.
Major Influential Factors
During a credit appraisal for a home loan, borrowers analyze several factors to determine your creditworthiness. First, they will thoroughly analyze the size of your debt burden. Then, experienced financial professionals will also analyze your loan size, length of commitment, and the frequency of your borrowing. Other borrowers will additionally analyze your credit score and financial habits. Moreover, experienced borrowers will even take specific social and community standards into consideration. For example, certain banks may participate in incubator programs or low-income housing solutions.
Also, compare and contrast home loan interest rates to find the lowest one possible. And, if you want to avail said borrowing facilities without stepping out? Procure a home loan online!