Banks and financial institutions offer home loans based on various parameters. One of them includes your employment status. Having a stable income source decides if you qualify. It is also one of the critical aspects besides your income, age, credit score, financial obligations, etc.
But why is it important? A home loan brings a long-term commitment as you get it for a tenure of 30 years. Having sound financial backing ensures your repayment journey progresses without any hiccups. It also eases the risks associated with lending such a massive amount for the lender. You can check this through the home loan eligibility calculator. It shows you the loan cost you incur based on your income and employment.
Here are some of the aspects to explain its impact clearly:
Primary income source: You could have various means of earnings like mutual fund dividends, rental income, part-time business profits, term deposit interest, etc. However, your only source of fixed revenue is through your employment. Hence, lenders emphasise the nature of your job, the relevance of your industry and its stability. This assures them of your financial strength to calculate home loan eligibility.
Financial standing: You need to be financially sound to pay the equated monthly instalments throughout the home loan tenure. It is a long commitment that cannot get fulfilled with uneven or insufficient income. Hence, your employment is a significant indicator of whether you can pull it off. That is also one reason it is considered the main parameter to judge your home loan eligibility.
Repayment capacity: You cannot contribute your entire savings and income to repay equated monthly instalments as you have other monthly expenses. Lenders recognise this and only consider 40-50% of your income as available for loan repayment. Your EMIs are also decided based on this. Hence, having a high paying job shows that you can bear the burden of adding EMIs to your current expenses. It increases your eligibility for home loan.
Negotiate variables: When you have things in your favour, you can get the best deal. Similarly, lenders are also willing to provide you with added benefits and leverage when they see you as a low-risk borrower. You can talk them into giving you some slack with home loan interest rates, repayment schedule, etc. This is all thanks to your increased home loans eligibility due to your employment status.
These are some of the ways your income, employment and financial strength impact your eligibility. So, make sure to keep these factors in mind and enhance the same before applying for home loans. This way, you can get the best deals depending on your financial requirements.