Indians want to own a house. It also signifies social rank and safety. In keeping with the growing demand for housing, the country’s real estate prices have skyrocketed in recent years. This has made house ownership incredibly pricey and, for most people, impossible without a mortgage loan.
A house loan is a large, long-term debt. Thus, lenders follow strict qualifying standards to avoid loan defaults. Affirmative action is a federal programme that provides financial assistance to low-income individuals and families.
Your credit score is one of the most important variables in getting a home loan approved. A credit score indicates a person’s historical creditworthiness. It is a three-digit number between 300-900 issued depending on historical credit conduct. Higher range numbers imply greater creditworthiness. Remember that your credit score is an important factor when applying for a home loan.
When applying for loans, having a good credit score might help.
A decent credit score is essential to get a top-notch Home Loan offer. Instant approval is given to your loan application since it assures the lenders.
With a good credit score, you’re in charge.
When you have a stellar credit score to work with, you’re in a much better position to haggle over Home Loans. For example, if you have a good credit history, your lender may be willing to cut the interest rate on your loan. Aside from that, the processing fee and other costs may be eliminated if you have a high credit score.
Maintaining a decent credit score isn’t rocket science, so don’t worry about it too much. More often than not, it’s the rookie blunders and lapses in judgement that get individuals in trouble, not the final score.
What is the minimum credit score required to be considered for a home loan?
An applicant with a poor credit score does not inspire much trust in the lender about their ability to repay the loan quickly. This is particularly true in the case of a house loan due to the larger loan amounts and longer loan tenures involved. Because of this, anyone looking for a house loan now must have a minimum credit score of 750 to be considered for the loan.
What is the impact of your credit score on your home loan?
Ordinarily, a lender takes a risk by lending money to a borrower, and the borrower pays the lender by paying interest on the money they have borrowed. Lenders are more reluctant to lend to those with a poor credit score since it increases the likelihood of defaulting on their loans. The increased risk associated with lending may present itself in various ways.
Home loan application approved at a higher rate of interest
Your credit score may still qualify you for a home loan if it is between 650-750, but the interest rates will be higher than those available to people who have credit scores above 750. If your credit score is between 650-750, you may still be approved for a home loan, but the rates will be higher than those available to people who have credit scores above 750.
In India, the practice of risk-based loan pricing is already well established. This practice is used by several top-tier institutions, including SBI and others. For example, SBI has a risk-based grading system for all house loans above Rs. 30 lakhs, which considers indicators such as credit score when determining eligibility. The prices shown below are only applicable to salaried candidates.
Approval of a home loan application on less favourable terms than originally requested
A house loan’s EMI is mostly determined by the interest rate and the loan’s repayment period length. A 30-year home loan term is now possible according to the applicant’s age. On the other hand, Lenders may be reluctant to lend for extended periods if an applicant has a poor credit score so that they may grant the loan for a shorter period instead. A greater down payment might also be required from the applicant for the lenders to decrease their LTV Ratio. Higher down payment and shorter lease terms might mean a greater financial strain for applicants.
Maintaining a decent credit score requires patience, a small amount of work, and a great deal of discipline on your part. It is possible that your credit score, whether good or poor, may have far-reaching repercussions when applying for a house loan. Before applying for any loan, it is wise to check your credit score to confirm that you have a decent one.