Home Loans Eligibility Calculator

What is Home Loan Eligibility

Before applying for a home loan, it is crucial to understand the eligibility criteria to avoid loan rejection that can impact your credit score. Home loan eligibility refers to the parameters based on which all banks and non-banking financial companies (NBFCs) evaluate the creditworthiness and repayment capability of the loan applicant. Therefore, having a clear idea about the criteria and fulfilling the same will make the process faster and effortless for you.

How is Home Loan Eligibility Calculated?

The home loan eligibility criteria may vary depending on the lending institution. A borrower can use the online home loan eligibility calculator that will compute the loan amount he or she is eligible to get. All that it takes is entering a few details like net income, loan amount, etc. Every lender considers certain factors for determining the eligibility of prospective borrowers.

Let us discuss some of these factors, as mentioned below:

• Age: Age is the topmost criterion banks or lenders consider when determining home loan eligibility. Most financial institutions limit the home loan tenure to an individual’s retirement age. Thus, older people may find it difficult to get a longer-tenure loan or may not be eligible if they are nearing retirement unless they have proof of regular income source.
• Credit Score: The credit score is another important factor based on which lenders assess the ability of the borrower to repay the loan. The CIBIL score is a three-digit number that is a summary of your credit history. It is advisable to check the minimum CIBIL score for a home loan since a poor credit score can lead to higher interest rates or loan rejection.
• Income Stability: The source of income and job stability for salaried individuals, for example, are taken into consideration by financial institutions when approving loan applications. Similarly, self-employed individuals can be eligible for a loan if they prove they have a steady income source.
• Property Details: The age and location of the property you have selected are among the crucial factors that lenders consider when approving a home loan. It is the security against which you avail of the loan. Moreover, the loan application would get rejected if the tenure is longer than the remaining years of the property. Hence, banks usually conduct a technical and legal investigation of the property before sanctioning the loan.
• Loan-to-Value (LTV): The loan-to-value ratio or LTV in home loan refers to the ratio of the loan amount to the appraised value of the property. It is one of the risk assessment tools or methods banks use to minimize the chances of defaults. Simply put, it is the percentage of the property value that a financial institution can lend to a home buyer.
• Debt-to-Income Ratio: Lenders and financial institutions consider the debt-to-income ratio, which is a measure of the prospective borrower’s repayment capacity. It is calculated as a percentage by dividing a person’s net monthly debt payments by the net monthly income.

Take a look at the table below to get an idea of the different factors that determine the eligibility to avail of a home loan:

Note: The information given above is indicative. The eligibility criteria may differ, depending on the bank or lending institution.

What are the Documents Required for a Home Loan?

Banks and financial institutions typically ask their customers to furnish some important documents to assess their eligibility. There may be some specific requirements depending on the lending institution where you are applying for the loan, the type of home loan, and various other factors.

However, here is a list of common documents that a prospective borrower will have to provide:

• Duly completed home loan application
• Recent passport-size photographs
• Identification proof (any of the following)
  • PAN Card
  • Aadhaar Card
  • Voter ID Card
  • Passport
  • Driving License
• Proof of Residence (any of the following)
  • Passport
  • Voter ID Card
  • Aadhaar Card
  • Ration Card
  • Utility Bills
• Proof of age (any of the following)
  • Passport
  • PAN Card
  • Birth Certificate
  • Aadhaar Card with DOB
  • Driving License
  • Class 10th (SSC) Marksheet
  • Bank Passbook
• Income Proofs
  • Salaried individuals should provide Form 16, a certified letter from the employer, recent bank account statements or recent three months’ payslips, or income tax returns of the last 3 years.
  • Self-employed individuals must provide their income tax returns of the last 3 years, recent bank account statements, or Balance Sheet and P&L Account Statement of the company or firm which is duly attested by a CA.
• Proof of your educational qualifications
• Property Documents, such as sale deed, the allotment letter or stamped agreement of sale, occupancy certificate (in case of ready-to-move-in homes), etc.

How Much Home Loan Can I Get on My Salary?

The loan amount you can avail of from any bank or lending institution will depend on several factors, including your income or in-hand salary after considering the deductions like PF, gratuity, & ESI. Normally, banks and lending institutions exclude the medical allowance and leave travel allowance when calculating the salary.

Your net income will determine the EMI you will be able to pay while meeting your monthly expenditures. Most banks/ lenders decide the loan amount up to 60 times one’s monthly salary. So, if you earn your monthly salary is Rs 25,000, you can get a loan amount of Rs 15 lakh approximately.

For example, Rohan earns a monthly salary of Rs 25,000. He can get a loan of up to approx. Rs 15 lakh for a residential property worth Rs 40 lakh. However, another person who earns a monthly salary of Rs 50,000 can get a higher loan amount of approx. 30 lakh for the same property.

Here’s a table that shows the home loan amount one is eligible for, depending on the net salary and other factors.

Home Loan Eligibility Based on Age

While you know that the maximum age limit for getting a home loan in India is usually up to 65 years for salaried individuals and 70 years for self-employed individuals, you must also thoroughly understand how your age can impact your home loan eligibility.

Many young adults in their 20s and 30s having higher disposable income may find it quite easy to avail of affordable home loans with longer repayment tenure and higher value. Home loan providers allow a maximum loan tenure of 30 years. However, the same may not be applicable for individuals in the higher age bracket, say in their 40s, and those nearing their retirement age. Such individuals may be eligible for a lower tenure.

Before you apply for a housing loan, make sure you check the age criteria. Given below is the maximum loan tenure one is eligible for based on age.

How to Improve Your Home Loan Eligibility?

Growing age or lack of a steady income source are factors that may prevent you from getting the right home loan for your dream home purchase. However, in some cases, it is possible to improve your loan eligibility. Here are five tips that can help you significantly enhance your home loan eligibility:

• Consider applying with a co-applicant: You can apply for a joint home loan that increases your chances of availing of a higher loan amount. This way, you can share the financial burden by adding a family member, like parents, spouse, siblings, and children, as a co-applicant. Furthermore, both you and the co-applicant become eligible for tax benefits according to the tax laws.
• Choose a longer loan tenure: Opting for a longer loan tenure may put a burden on your pocket as you may have to make substantial payments. However, it may lower your EMI. That means, it is more likely that you will ensure timely repayment of your loan, thus enhancing your eligibility.
• Repay existing loans: Since most financial institutions assess your home loan eligibility based on the Debt-to-Income Ratio. Ideally, prepaying all your existing loans before applying for a home loan is a good idea, something that will also improve your credit score and increase your loan eligibility.
• Maintain a good CIBIL score: A higher credit score of usually above 800 can greatly help enhance your home loan eligibility as they imply a high repayment capacity. Thus, you can keep a regular check on your credit score to avoid defaults and possible loan rejection.
• Specify additional income sources: Mentioning all your additional income sources is one of the important things you can do to increase your debt to income ratio, thus improving your loan eligibility. For instance, if you own another house, you can rent it out and declare the additional income in the loan application.

Home Loan Eligibility for Top Home Loan Providers in India

In the following table, we mention the home loan eligibility for some of the prominent home loan providers in India:

How to Check Home Loan Eligibility Online?

As a home loan seeker, you have the advantage of knowing the home loan eligibility from the comfort of your home. Most banks and financial institutions have this digital facility on their website. Here’s a quick guide to making the process easy for you:

Firstly, enter the basic information like your contact number, city, and date of birth on the home loan eligibility calculator page. Then, choose the value of different factors, such as:

• Net Income
• Loan Tenure
• Interest Rate
• Other EMIs

Checking the home loan eligibility criteria of different home loan providers will help you weigh your options and select the right housing loan that will give you the convenience of availing the best EMIs options and ensuring timely repayment.

FAQs

Disclaimer: The information given above is only for quick reference purposes. The figures mentioned in the tables are subject to change at the sole discretion of the particular bank or lending institution.

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