Buying a house to live in is a significant achievement in one’s life. Once this goal is achieved people often aim at buying another property either for investment or to secure the future with a regular rental income. Taking a loan to buy a second home poses greater challenges than the first one. A correct understanding of the eligibility criteria will help you prepare better when you apply for a second home loan.
The application process for a second home loan is pretty much the same as the first one, just that your credit reports and income documents are more closely securitized to ensure you have the ability to pay back the amount. If you have already taken one home loan, a second mortgage will usually bring stricter terms and conditions and higher interest rates. Banks finance only 70% of the value of the house or even lesser as compared to 80-90% of the value for the first house. This translates into a bigger down payment. ICICI bank home loan is capped at 80% of the property value.
Some factors that are taken into consideration are
You will find it easier to get approvals if you’ve been in a full time job with a company for a long period of time. People who have only part time jobs or those who frequently change jobs raise doubts about their future earning capacity. Lenders stay away from such candidates. To get approved for an ICICI bank home loan you need to have a stable employment history.
Your credit score and report play a major role in getting approved for a second home loan. Make sure that your credit is in very good shape before you start applying. Lenders analyse different aspects of your credit report—your balances in comparison to your credit limit, any late payments on the current loans, any judgements, tax liens or sign offs in the past. Any bad remarks on the report will reduce your chances of approval to a great extent. To get approved for an ICICI bank home loan, you need a Cibil score of at least 750.
The income requirement for a second home loan is quite high as compared to the first. Lenders want sufficient proof that you have substantial income to cover for the second home loan. Your debt to income ratio is calculated by dividing the total of all your current obligations with the gross monthly income. This percentage is used to determine the actual amount you will be approved for. If your current obligations already include a home loan along with credit cards and personal or car loan your current EMIs will be deducted from the income to see how much more debt you can handle. ICICI bank home loan limits the EMI to 50% of the monthly income left after paying for the existing EMIs.
Lenders want to make sure that you have enough cash on hand to pay for the down payment and to cover for at least six months of EMIs for both the houses. Hence you need to accumulate a substantial amount of liquid assets to give sufficient proof to the lenders that you have enough reserves to support the loan. Lenders will ask you to submit your savings account statement, fixed deposits and other investment details before approving the loan.
Here are some preparations that you can do make the financing of second home easy.
Carefully study the factors that banks consider before approving a loan and prepare well before applying, so that you easily get the home loan that you desire.
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