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Home Loan Eligibility Criteria


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The facility of home loans offered by various banks and financial institutions in India not only allows people to fulfil their dreams of owning a house one day, but also offers them several tax benefits. The money availed through a home loan can be utilized for different purposes including construction of a new home, purchase of a new/used for home or even a home renovation. All banks and NBFCs have their own eligibility criteria through which they assess the repayment capacity of the borrower. Broadly speaking, the borrower’s repayment capacity depends on multiple different factors including his/her monthly disposable income, current liabilities, owned assets, spouse’s income, any surplus income and stability of income. You can use our home loan eligibility calculator and instantly find out the home loan amount you’re eligible for.

The primary motive of the Indian lending establishments is to ensure that the borrower is comfortably able to repay the home loan amount as per the repayment schedule. The higher is your disposable monthly income, the higher home loan amount you’d be eligible for. A bank or financial institution normally assumes that you can use 55% to 60% of your monthly disposable income for home loan repayment. However, there might be some exceptions to this wherein the lending establishment might calculate the money available for EMI payments based on your gross income rather than the disposable income.

Following are the main factors that all major lending establishments take into account:

Considered the most significant factor based on which a bank or financial institution decides the maximum loan amount it can offer you, monthly income is calculated differently for salaried individuals and self-employed professionals. If you are a salaried person, it’s your net monthly salary that will be taken into account. This is your take-home salary minus all the regular monthly deductions. Please note, the lender might deduct any performance-based allowances, tax payments and EMIs while ascertaining your eligibility. On the other hand, if you’re self-employed, your monthly income would be determined by your yearly profit.

The loan amount that a lender in India would be open to disbursing would usually be 60 times your net income. For instance, if your take-home salary is INR 1 lakh per month, you might be offered a home loan of around INR 60 lakh. However, there are some other criteria that also come into play.

The banks and financial institutions would visit the concerned property and conduct a technical evaluation while processing your home loan application. They will take multiple aspects into account, including the current market value of the property, property’s age, whether it has been granted NOC (No Objection Certificate), completion and encumbrance certificates from the authorities, if it’s free from disputes and its surrounding locality.

You should steer clear of old properties as lenders are wary of structural damages and the chances of collapsing, and both these can have a negative impact on the sanctioning of the loan. While some lenders prefer properties located in prominent areas or within the city, there might be certain localities that lenders might be hesitant granting home loans for. This is usually because of the absence of clearances from the local authorities.

The lender would also take into account whether you’re working with an employer having a good reputation in the market or not. Your credibility will automatically increase and the lender might offer you a good home loan deal if your employer is well-known and has an impressive turnover. Being a part of such an organization works as a major plus for the applicant, especially in case of home loans. Your employment stability will also be factored in as an important eligibility criteria. The lender might not process your home loan application unless you’re salaried and have been employed with the same company for at least the past 2 years, or in case of being a self-employed professional, have at least 5 years’ total earnings to show.

Credit score is a numerical figure that shows your creditworthiness. Any lending establishment would look at your credit history before approving your home loan application. Factors like your existing loan amount, credit you’ve availed so far and your repayment history will affect your credit score. This in turn will impact your home loan eligibility. Credit bureaus in India like CIBIL and Experian regularly collect information regarding your transactions from credit institutions and banking establishments, to arrive at your credit score. Majority of these credit bureaus rate credit score between 300 to 900 points. The higher you are on this scale, the better will be your chances of getting a good home loan deal.

The tenure of the home loan is usually decided based on the ability of the borrower to pay off the loan. This in turn depends on the borrower’s present age. Your chances of getting a home loan will improve significantly if you have a good number of working years ahead of you. As a home loan’s tenure can go up to the retirement age, a prospective borrower who is 40 years old can get a home loan of 20 years’ tenure. However, please also note that working individuals in the age bracket of 30 to 50 years are preferred by lending establishments as they’re more financially stable. As expected, preference is given to professionals in their early 30s. People over 60 years find it the most difficult to avail home loans. Regardless, some banks do offer age relaxation till 65.

You can improve your chances of home loan approval in India by involving a co-applicant such as your close friend, close relative or spouse, in your home loan application. Doing so would enhance your eligibility because of a direct increase in the total eligible income in the application. However, please keep in mind that some banking establishments and financial institutions might permit only immediate blood relatives like siblings, sons, daughters, father and mother to become co-applicants.