How Do Banks Decide on Your Loan Eligibility?

When you apply for a loan whether it is a personal, housing or mortgage loan, the first and foremost aspect banks look at, is your ability to repay. Although, there are other specific criteria to be fulfilled by every applicant, the following are the basic points or rather calculations based on which your loan eligibility is determined.

It is not all that difficult to understand how these calculations are arrived at, in fact if you are able to work it out on your own then you can find out what will be the maximum loan you can avail, irrespective of which bank you apply to.

1) IIR- Installment to Income Ratio

Banks understand that your loan value should not exceed your repaying capacity. This ratio is 33.33% to 40% of your monthly income. Using the IIR, how much you can borrow as well as repay will be decided by the bank.

For instance if you earn Rs.50,000 per month, then your IIR is Rs.16,500. That is, the maximum emi payable by you is not more than 16,500 per month. This determines your maximum loan amount, and will vary depending on the tenure you choose.

2) FOIR- Fixed Obligations to Income Ratio

This is perhaps the more popular calculation, the banks go by. The Fixed Obligations to Income ratio helps in determining if the applicant has any other loans he is repaying, while he applies for a new loan. Those loans which require more than 6 installments to be paid are the ones considered for FOIR. Let us see how it is done;

For instance, if your income is Rs.75,000 per month, and you have an auto loan running for which you are paying an emi of Rs.5000 and another personal loan of Rs.7500 per month. Considering that 50% of your income can be paid towards your loans,

We have,

50% of 75000 = Rs.37,500

Auto Loan Emi = Rs.5000

Personal Loan Emi= Rs.7500

So, your disposable income for this fresh loan is:

37,500 - 5000 - 7500 = Rs.25,000

Although FOIR is mainly a ratio, you need to look out for the value mentioned above. This will help decide how much you can afford to pay as monthly installment despite paying your other emis.

3) LTC or LTV - Loan to Cost or Loan to Value Ratio

This ratio is most often used for calculating an applicant's ability to repay a housing or a mortgage loan. Here, rather than an applicant's income, the property's value is taken into consideration. Around 60 to 70% of the value of the property is used to determine the maximum borrowable loan amount.

For instance, if the value of your property is Rs.1 Crore. Then the maximum loan amount you can avail based on your property would be Rs. 50 to Rs.60 lakhs. Of course, when it comes to determining your repaying capacity, your income will definitely be considered. The LTV ratio varies depending on whether all the aspects of the property is proper or not. Sometimes, even 80% of value is provided as funding depending on the application.

Most banks consider up to 60% of an individual's income can be paid towards monthly installments. However, it is always advisable to keep this percentage down to 40%. You don't want to seem too credit hungry when you go ahead with applying for a new loan. Every loan you pay or don't pay is recorded, and is made as a part of your credit information report. Your credit score is also based on it, and is one of the key factors for your loan to get approved.

Priya is a financial consultant with RupeeZone, visit http://www.noproblemcash.com/ you will find a whole lot of details on personal loans and how to make yourself eligible for easily availing one.

To check your personal loan eligibility visit  http://www.noproblemcash.com/?c=214594

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How to Keep Informed on Mortgage Rules and Regulation Changes

If there ever was a time when home loans were easy to qualify for, it must not have lasted long. These days, it feels like it is getting harder and harder to receive a home loan. This does not mean it is impossible to get a loan but the bank requires a lot of information from the borrower lately.

Keeping informed on changes to rules and regulations could stop homeowners from missing out on opportunities to lower their monthly payments, receive cash out of their homes and even purchase a larger house. Luckily staying informed is not difficult tasks with the many online publications that will even display on mobile devices like smartphones and tablets.

Finding Websites with Mortgage News and Information
If you want to stay informed, the first thing to do is find a website with the right information for you. Some websites are geared toward the homeowner and some are geared toward the mortgage industry professionals. You also want to make sure it is a mortgage website and not real estate, because a real estate website will speak more about changes to the housing market along with how it affects sales and purchasing. Mortgage rules and regulations are impacted slightly by the housing market but it should not be the main topic of discussion.

The features of a website can also draw you in, whether offering a mobile friendly option or presenting information in a certain way. This can make it easier to find what you want, when you want it. So once you have found a few websites you like, play around with viewing them on different devices and sign up for their newsletters (you can always unsubscribe later). Playing with the websites will give you a better feel for how they can help you even when you are on the go.

Knowing When to Work with a Lender
Although it is always a good idea to speak to a mortgage lender, knowing when to actually move forward could mean the difference between a large savings and a little savings. Mortgage rate trends will shift along with the rules and regulations. By following when the next shift in rates will be or reading about new mortgage programs that become available, along with the rules attached to those programs, you can make a better decision on when to commit to a new loan.

There are situations where loan programs change depending on who they are offered by. Whether a homeowners current loan is offered by the FHA, VA or some other government entity, shifts in regulations could mean shifts in insurance premiums as well as qualifications. This could be both leniency or more stringent lending rules. Being well informed, if a rule were to come into effect, you would know when your deadline would be to change over to a new program possibly with a refinance.

The Future of Mortgage Rules and Regulations
Looking towards the future will always benefit homeowners because mortgage rules and regulations are so well documented. They clearly state when they go into effect and who will be affected by them so homeowners can always plan in advance for upcoming changes or possibly opportunities to save money such as through new programs or refinance options.

Start finding the right option for you when it comes to mortgage news and information. There are many publications that can offer both friendly approaches to information and well as easy to use functionality. It may also be a good idea to follow a few so that you can match the information up between them.

There has never been a better time to stay informed on mortgage rules and regulations. The government is offering programs and incentives to refinance and there are plenty of investment opportunities available as well. Fred Bohman understands that homeowners and home buyers benefit from mortgage news and information so he provides articles to help them prepare.

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