How do banks decide on the amount of Home Loan to be sanctioned?

1. How do banks decide on the amount of Home Loan to be sanctioned? The home loan is the most popular means of finance to meet the funds' requirement for buying a home. After choosing the desired property whether it is under construction, newly built or ready to move in, the next step you need to take is, start researching on the various lenders who provide a ​home loan​. You must make your budget well before starting to look for the desired property and proceed accordingly. This is very important as the amount of home loan is decided on various factors and it is never given to meet the 100 percent cost of the home. Most lenders have a maximum limit of 90% of the property’s value which can be provided as a loan. Another important aspect is to check your eligibility for the home loan, this you can check by using the Home Loan eligibility calculator. The parameters on the basis of which banks and NBFCs decide on the Home Loan amount are: 1. Value of Property:​ Home Loan is given by taking the property purchased as collateral. Thus, the amount of loan is directly related to the value of the property. The banks or NBFC measure

2. the risk involved by assessing the property’s condition, location, locality, and future prospect. If the value of the property is high along with good location, locality and future prospect than you are likely to get maximum financing for your home. 2. Credit Score:​Credit score reflects your creditworthiness and gives banks the indication of the risk involved in advancing loan to you. If your score is high, then the banks have less risk which encourages them to lend more. You can get a home loan even at a decent credit score, but the percentage financing and interest rate will not be as favorable as it will be in case of a higher score. 3. Financial Stability:​ To get a home loan you need to have a regular income source. Your income level and years of employment or business will play a crucial role in your eligibility after which you can get upto 60 times of your monthly income as a home loan. Income level is crucial as it determines your repayment capacity. Higher the income better are the chances of getting a higher loan. 4. Liabilities:​ Not just income but along with it the fixed liabilities that you have are also taken into account. It is because you can pay only that much of EMI from your present income as much as you have left after clearing the monthly dues of existing liabilities. So, a high proportion of liabilities at the time of home loan application will reduce your home loan amount to the point where it seems comfortable to the bank that can pay the EMI. 5. Balance Transfer:​ You can also transfer your existing home loan to a different lender which is offering a lower interest rate than your existing one. This is called ​balance transfer ​and after your transfer, the loan amount is considered a fresh loan. Before deciding on the amount of home loan your income level, liabilities, credit score, the value of the property are assessed. Just because you meet the eligibility criteria does not guarantee you home loan for the desired amount, higher the loan amount higher will be the EMI, thus you need to have the means as well to be able to pay those EMIs.