Before you begin hunting for a property the most important thing to do is to work out exactly how much you home loan you can get? This will determine your monthly EMI outgoing. Knowing your capacity to get the home loan will help you decide your budget and which properties you should look at. How much home loan I can get? Don’t Guess! The amount you can borrow will depend on a number of factors:

Your Income

This is the most important factor which will determine the exact amount you can borrow. Your income needs to be able to cover repayments on your loan as well as your basic living costs. If you are applying for the loan jointly with another person your repayment capacity may be greater, which can mean greater borrowing power.

Employment Status

One of the main things that lenders will look at is if you are employed. The lender will look at where you are employed and how long you have been employed by that company.

Financial Commitments

Lenders will look at all other financial commitments you still having owing. This can include car loans, personal loans, credit card debts and other debts.

Your Assets & Investments

Your savings and other investments will also impact your borrowing capacity.

Your Deposit

First home buyers should save around 10 – 20% of the property value as a deposit. The greater the deposit, the less you will have to borrow and the lower your EMI payments will be.

Your Credit Record

The lender will check to see that you have no red flags against your name for defaulting on previous loans, credit cards or other lines of credit by looking at your credit record. It is worthwhile to check your credit record before you apply for a home loan so you are able to amend information in your credit history if you believe it to be inaccurate.

You can use CIBIL website to order one for yourself: http://www.cibil.com/credit-score

Get Pre-Approved Loan

Generally, it is recommended that you get pre-qualified for a loan before you start viewing homes with the serious intention of buying. The preapproval process involves meeting with a lending bank and authorizing them to examine your current financial situation and credit history. On the basis of this examination the lender will provide you with a document that details how much you can borrow to buy a home.

The benefits of pre-approval include: 

• You’ll have information about what you can afford and be able to plan accordingly 
• As a qualified, motivated buyer you’ll be taken more seriously when you make an offer on a home 
• Banks can tell you whether you qualify for any special programs that will enable you to afford a better home (particularly if you’re a first-time buyer)

Real estate financing is available from many sources, and an experienced advisor will be able to suggest lenders with a history of offering excellent mortgage/ home loan products and services. For more information about the benefits of pre-approval and the loan process in general, see The Loan Process – Financing Your Home Purchase.