How Banks evaluate borrower if he is eligible for Home Loans, using Risk Rating Parameters.

All home loan applications are subject to Risk Rating Model Table. Total maximum marks a person can get is 168 and the cutoff is set at 96. 

The details of the various ‘Rating Parameters and Risk Rating Model’ are given here. Most of the Banks in India, take the decision, whether the borrower is loan eligible or not, based on number of points the borrower gets  from the below table.

‘Rating Parameters and Risk Rating Model  Table’

Sr. No.	Variable	Score	Max	Min
1	Borrower Age (in Year) (a)0–8 (b)Above 18–upto 25 (c)Above 25–upto 40 (d)Above 40–upto 50 (e)More than 50	0 1 4 5 0	5	0
2	Education Qualifications (a)Doctorate/Post Graduate (b)Graduate (c)Diploma (d)Higher Secondary (e)Less than Higher Secondar	5 3 2 1 0	5	0
3	Marital Status (a)Married (b)Single	12 3	12	3
4	Mobility of Individual-Location (a)Has not changed location in past 3 years (b)Changed location once in past 3 years (c)Changed location more than once in past 3 years	10 3 0	10	0
5	Number of dependents (a)Zero (b)One (c)Two (d)More than two	8 5 2 0	8	0
6	Number of join applicants (a)0 (b)1 (c)2 or more	0 5 9	9	0
7	Relationship with bank (a)All banking done through bank (b)Good track record of banking with bank (c)Short term relationship (d)No existing relationship	14 12 3 -4	14	-4
8	Employer type (a)Govt./Public sector (b)MNC (c)Listed private sector companies (d)Professional (e)Unlisted private companies (f)Own business (g)Self Employed (h)Pensioner drawing pension through Bank of Baroda (i)Pensioner drawing pension from others (j)Others	9 9 9 4 8 2 2 0 0 0	9	0
9	Designation (a)Senior Management (b)Middle Management or Self employed (c)Junior/Clerical/Pensioner	5 3 0	5	0
10	Stability of Income (a)Income has been steadily increasing over the last 3 years (b)Income has been almost the same over the last 3 years (c)Income has beenunstable over the last 3 years (d)Income has been steadily decreasing over the last 3years	12 7 0 -5	12	-5
11	Proof of Income of borrower (a)Income tax returns (b)Salary slip (c)Letterhead (d)No proof	3 3 1 0	3	0
12	Marketability of property (Marketability will increase if significant developments are happening in nearby areas,also it will depend on the condition of the property etc.) (a)Very good (b)Good (c)Fair (d)Poor	15 10 5 -8	15	-8
13	Housing loan purpose category (a)Construction (New) (b)Purchase (Old construction) (c)Improvement (d)Foreclosure (for borrowers who borrow in order to repay a previous housing loan) (e)Loan given under the rural housing scheme	4 0 8 8 2	8	0
14	Loan to value ratio (a)Less than 0.5 (b)0.5–0.7 (c)Above 0.7–upto 0.9 (d)More than 0.9	18 12 7 0	18	0
15	Net worth to loan ratio (a)0–0.5 (b)Above 0.5–upto 0.75 (c)Above 0.75–upto 1.0 (d)Above 1.0–upto 1.5 (e)Above 1.5–upto 2.5 (f)More than 2.5	0 1 2 3 4 5	5	0
16	Net annual income of the borrower (in) (a)Lessthan 1,00,000 (b)1,00,000–2,00,000 (c)Above 2.00,000-upto 3,50,000 (d)Above 3,50,000–upto 6,00,000 (e)More than 6,00,000	-5 2 4 6 10	10	-5
17	Fixed obligations to income ratio (a)0-0.3 (b)Above 0.3–upto 0.5 (c)Above 0.5–upto 0.7 (d)More than 0.7	12 8 4 0	12	0
18	Guarantor’s net worth to loan ratio (a)0–0.5 (b)Above 0.5–upto 1 (c)More than 1	-4 4 8	8	-4
	Sum		168	-23

So, 

Did you calculate your Risk Rating Points?

Where do you stand?