Home loans are the quickest way to transform your dream house into reality. Banks and housing loan finance companies have made it easier for one to purchase their dream abode swiftly. However, the financial institution cannot hand over a lump sum without scrutiny. Lenders have a checklist that needs to be met for you to be eligible for a home loan.
Let’s check out those factors that determine your home loan eligibility.
Your Monthly Income
Your income plays an essential role in home loan eligibility criteria. A standard range of net monthly income expected by the lenders is above INR 25,000. If your salary is between ₹ 25,000 – ₹ 40,000, you may be eligible for a home loan provided your cumulative monthly obligations like rent, EMI, etc., do not exceed 50% of your current income. For salaries above ₹ 40,000, you may be eligible for loans if your cumulative monthly obligations do not excel 65% of your total income. However, your repayment capacity too plays an important role – your existing EMIs plus the EMI you will have to pay as a result of the home loan should not exceed 50%-65% of your monthly income.
Your Employment Type
Just like our income, the nature of your job is also crucial. If you are working for an MNC or a reputed public or private sector company, the lender will consider you a reliable borrower, and may be able to get a home loan more easily (provided other criteria are met).
Age is another important factor for home loan eligibility. The lender will calculate your repayment structure depending on the years left until your retirement. So, the younger you are, the chances for you to get the home loan in the lesser EMI option. To avail of the loan, one must be between 21 to 65 years of age. Your age should not be more than 65 years at the time of loan maturity.
Credit scores are essential criteria to decide on your housing loan eligibility. Lenders evaluate your credit history before sanctioning your loan to understand your capacity to repay and your prior history with regards to repayment of loans. A low credit score or pre-existing loans may lead to the rejection of your home loan application. Any outstanding loans will reduce your chances of getting a high loan amount. Hence it is imperative to maintain a healthy credit score before applying for housing loans. Ensuring a good credit score will help you build credibility with your housing finance company. So, clear out your existing debt obligations and any unpaid dues before you apply.
Your Property Details and Loan to Value Ratio (LTV)
The property or home you are taking the home loan is also a critical eligibility criterion for your lenders. Lenders will decide your loan amount based on the work of your property. Additionally, lenders consider your down payment chargers. Depending on your repayment capacity as well as the nature and value of the property, lenders may provide only upto 80%-90% of your property value as a home loan, and the rest of the 20% has to be borne by you. This is called the loan to value ratio.
Your academic qualification and experience play a significant role in the eligibility criteria. An impressive one will give you more chances to score the loan. In salaried employees, a minimum of two to three years of work experience is needed by most lenders for a home loan candidate. At the same time, a self-employed individual who has a successful operational company for a few years along with stable cash profits and turnover, may also be considered eligible.
You can also check your home loan eligibility quickly using a home loan eligibility calculator. Enter the net monthly income, loan tenure, interest rate and existing EMI to determine your eligible home loan. Please note that your lender will also take into account other parameters to determine your final eligibility
We hope you found this article useful. Contact us for an instant home loan from a trusted housing finance company.