Home Loan Eligibility
Buying your dream house in the current times is definitely a challenge. The price hikes happen ceaselessly while certain part of the cities are becoming less and less livable. But the good news is, interest rates are at an all-time low. Yes, applying for a home loan could be a swift solution to each one of your house-related financial crunch. But like every other loan, your bank/ financier will demand you to provide proofs that you are more than capable of settling the loan within the stipulated tenure.
There are quite a few public sector and private lenders as well as home financiers assuring customized loans. For instance, if your salary doesn't make you eligible for a 15 year tenure loan, you can opt for a 20 year tenure with lesser down payments and reduced EMIs. We all know about the big daddies in the arena such as India Bulls, Aditya Birla, and Reliance who offer highly competitive rates apart from banks.
Perfect Home Loan Deals for you
Home Loan Eligibility Criteria
- Loan eligibility criteria differ for each banks/lender.
Approvals are based on borrowers' incomes, credit profiles and existing relationships with the bank | Age | Minimum: 21 yrs.
Maximum: 65 yrs. (depending on type of employment) |
| Minimum Net Annual Income | Rs. 5 - 7 lakhs depending on type of employment, EMIs offered up to 50% of net income, on average |
| Type of Employment | Self-employed or Salaried |
| Status of Employment | Regular; at least 1 yrs. in current job/business/profession.; at least 2 yrs. of prior employment |
| Type of residence | Owned/ Rented |
| Status of Residence | At least 1 yr. at current place of stay |
| Credit Rating | Good rating as per recognised credit bureau |
| Type of property being purchased | Affects loan amount eligibility |
Documents Required for Applying Home Loan:
Supporting documents vary according to lender requirements:
- Signed application, photographs affixed
- Identity Proof: Passport/ Voter ID / PAN Card
- Residence Proof: Passport/ Voter ID/ Driving License/ Water Bill/ Electricity Bill/ Lease agreement
- Income Proof:
- Salaried individuals - Latest Salary Slips (3 months)/ Current Salary Certificate
- Self-employed persons - Latest bank Statements (3 - 6 months)/ Audited financial statements
- Tax Proof:
- Salaried individuals - Latest Form 16
- Self-employed persons - Latest ITR Form
- Employment Proof:
- Salaried individual - Employment certificate
- Self-employed persons - Legal documents pertaining to establishment of the business/profession e.g. MOA/ Partnership Deed etc.
- Property Documents
- Processing Fee Cheque
- Co-applicant's (if any) documentation
Factors that can Affect Your Home Loan Eligibility:
1) Age: Age is the first and foremost factor a lender/ financier considers when one applies for a housing loan. Normally, financial institutions attempt to limit the house loan term to the primary applicant's age of superannuation. This means young professionals (20s and early 30s) can avail a loan with a term of up to 25 years with no trouble. But older applicants especially those beyond 40 can find it a tad tough to be eligible for an extended tenure. Many a time, single applicant aged 50 and above were denied home loans purely on this basis.
2) Income: Let us categorize this into salaried, professional and self-employed. Whichever category the applicant falls into, a steady and regular source of income is must. Basically, there are fewer risks in loaning money if the applicant is an earning individual.
- Salaried Individual: If you are working for any government department or at any registered private company, you belong to this group. Most banks insists that the applicant should have completed at least one year in the present firm at the time of application. Pay slips, Form 16, bank statements and employer reference letter are the documents almost all lenders demand. Proofs for the same is needed for co-applicant and guarantor too (if applicable).
- Independent Professionals: Doctors, dentists, architects, engineers, management consultants, chartered accountants, freelance workers etc. belong to this category. Bank statements and ITR papers have to be submitted.
- Self Employed: Do you have your own company/ business? Or do you have other source of income like rented properties or hold shares? Then you belong to this category. If you have bank statements and tax-related papers to show, you can certainly apply for a home loan.
3) Rate of Interest: Home finance eligibility is always inversely proportional to the rate of interest. If the rate is more, eligibility will be less and vice-versa.
4) Loan Term: If you opt for a longer tenure, your eligibility will improve. EMIs too will lesser and manageable. But the downside to this is, you will end paying more interest.
5) Outstanding Loan(s): Indian banks and financial institutions always recommend keeping the EMI to Income Ratio between 50 or 60 percent. This is to leave window for future loans or to pay of existing loans if any. But unsettled loans could be a great damper on your eligibility.
6). CIBIL Report: Banks also scrutinize your credit repayment history from CIBIL (Credit Information Bureau India Limited), which is country's regulator and first credit information bureau. They keep detailed records of every info regarding credit history relation between you and lenders/ creditors. A negative entry can bring down your eligibility significantly.
Home Loan Eligibility Calculator
Different factors are considered for calculation of the home loan eligibility. These factors include fixed monthly obligation, monthly income, retirement age, present age, etc. The home loan affordability factor can also play a major role in determining the home loan eligibility for you.
Different banks have their own eligibility calculators for determining the applicant’s eligibility for a home loan. Details about the eligibility calculators for some of the top banks in India are given below:
Indiabulls is one of leading home loan providers in India. The home loan eligibility calculator tool offered by Indiabulls is a simple tool where home loan applicants can easily calculate their eligibility towards the home loan. There are different factors like home loan interest rate and home loan tenure that determine the home loan eligibility factor for an individual.
Process of Home Loan Eligibility Calculation:
- Go to the official website of Indiabulls home loans.
- Navigate to the page called Home Loan Eligibility Calculator: https://www.indiabullshomeloans.com/home-loan-eligibility-calculator/
- Enter your net monthly income in the first box.
- In the second box, enter the tenure for which you wish to take the loan.
- In the third box, choose the rate of interest that must be associated with your home loan.
- The home loan eligibility tool will automatically calculate the loan amount that you are eligible for.
PNB is one of the leading banks in India and offers great home loan solutions to its customers. To know your eligibility for a PNB home loan, use their home loan eligibility calculator. It is a simple tool that is available on the official website of the bank. It allows you to calculate the home loan eligibility factor by entering certain data in the specific boxes.
Process of Home Loan Eligibility Calculation:
- Go to the official website of PNB.
- Navigate to the page called ‘Home Loan Eligibility Calculator’.
- Scroll down to the box where you need to enter the data required for eligibility calculation.
- Enter your monthly income in the box that says ‘Gross Monthly Income’.
- Enter the loan tenure in years in the box provided for Loan Tenure.
- Choose the annual rate of interest to be associated with the home loan.
- In case you have other EMIs to pay, mention the amount the box called ‘Other Existing EMIs’.
- The home loan eligibility tool will automatically calculate the loan amount that you are eligible for.
- You may change your inputs to find out the loan that is best suited for you.
LIC Housing Finance Limited is one of the leading home loan providers in India. The home loan eligibility calculator tool available on the official portal of LIC HFL is an easy-to-use tool that allows you to know your eligibility towards a home loan.
Process of Calculate LIC HFL Home Loan Eligibility:
- Go to the official website of LIC HFL.
- Navigate to the page called ‘Loan Eligibility Calculator’.
- Enter the monthly income that you have in the box called ‘Gross Monthly Income’.
- Enter the total EMI that you are paying at present in the next box.
- Choose a rate of interest as per your convenience and enter it in the box called ‘Interest Rate’.
- Choose the term of the loan as per your suitability.
- The loan amount along with the EMI will be displayed below.
- A pie chart is also present for better understanding of the loan and associated charges.
Let us understand home loan eligibility calculation with the help of an example. Chandra Patra is an employee of a leading company in India. His salary break up is mentioned below:
| Income |
Amount |
Deductions |
Amount |
| Basic |
32,000 |
Income Tax |
3,300 |
| HRA |
900 |
Provident Fund |
2,200 |
| Conveyance |
10,000 |
----- |
----- |
| LTA |
9,000 |
----- |
----- |
| Special Allowance |
55,000 |
----- |
----- |
| Medical expenses |
2,000 |
----- |
----- |
| Total |
1,08,900 |
Net Income |
1,03,400 |
Let us consider that Chandra has no loans or liabilities at present and his net available income is Rs.1,03,400. However, you one must always remember that Leave Travel Allowance is not taken into consideration by the bank while calculating the salary. The medical allowance is also excluded from the calculation. This is because, these expenses are not derived by an individual with his/her salary. In this case, Chandra will only get these amounts as reimbursements, in case he spends on medical needs or travel requirements. Thus, the bank or the lender will deduct that LTA and medical expenses from the net income. Chandra’s net income now stands at Rs.1,03,400 – Rs.(9,000 + 2,000), which is equal to Rs.92,400.
Thus, the loan eligibility for Chandra Patra stands at Rs.92,400 x 60 = Rs.55,44,000
In case of a home loan, EMI is restricted to a maximum of 40% to 50% of the net income (monthly) by most banks. This suggests that you are eligible for a home loan where the equated monthly instalment is not more than 50% of your monthly income.
Eligibility is not an easy thing to assess. The banks and lenders will be considering your present liabilities, income, assets, etc. while calculating your home loan eligibility. In case the mortgage requirement is slightly higher that the eligible loan amount, some changes in the way you present yourself can help in increasing the eligibility factor. Tips to increase you eligibility for a home loan are mentioned below:
-
Clearing Existing Loans – Ensure that you pay diligently towards your credit card outstanding or personal loan instalments. These can make the lender reject your application. The ideal thing to do is clear all dues and collect a no-due certificate before applying for a home loan. Ensure that your CIBIL report reflects these payments when you apply for home loan.
-
Variable Pay – Ensure that you keep track of the variable pay that you get with your salary package. Calculation of eligibility towards a home loan also depends on this factor.
-
Rental Income – If you have a house that is not being used by you, lease it out. The money that you earn as rental from this property can be used by you to show additional income source when you apply for a home loan. Your loan value can easily be enhanced by adding the rental income with our regular earnings.
-
Increase in Tenure – The tenure of the home loan and the eligibility factor are directly proportional to each other. The eligibility increases upon increasing the tenure of the home loan. However, the maximum tenure that can be availed at present stands at 30 years.
-
Income of the Spouse – In case your spouse has a regular source of income, then applying for a joint home loan can prove to be advantageous. The home loan eligibility goes up dramatically if you apply for a home loan with your spouse. This also suggests that both of you will have to repay the loan together.
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Take the Time You Need – Before making an application for a home loan, it is advisable that you take a look at your credit score. Look for errors on your report. In case, you find an error, ensure that it gets cleared by CIBIL. In order to get a loan quickly, do not apply with multiple lenders. Instead, find out the offers that you can get from different lenders. If the CIBIL score that you have is good, different lenders will be more than satisfied to offer the loan amount to you. Before you choose your lender, speak to an existing customer of that lender. Easy schedule of repayment, competent rates of interest and good services are the things to look at while choosing a lender.
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Step up Loans – Step up loans can be considered by you if you wish to increase your home loan eligibility factor. This is a great option for people face a lot of struggle initially, but get rewarded as they get established. Example – Chartered Accountants and Doctors. Under step up loans, lower EMIs will be offered with the loans. The instalments will go up gradually in the future.
Bank Bazaar enables users to check how they fare on eligibility by inputting key background information relating to income, age, employment,existing loans etc.
The result are provided with free, instant quotes on the best home loan offers available to them based on data provided.
This eliminates the guess-work related to choosing a home loan.
Users can then compare their offers across various lenders and apply for the loan of their choice, availing of exclusive offers provided by Bank Bazaar to its users through collaborations with leading institutions.
- Can I also apply for a home improvement (furnishing) along with this?
As long as you have sufficient income proof, you can either avail a larger amount that will take care of the home cost as well as interiors or you can apply for a separate improvement loan.
- Can I opt for different kinds of Home Loan interest rates?
Definitely. You can choose either Fixed or Floating rates. Both come with its own pros and cons and is dependent on the changing base rate as per the current trend.
- How do banks calculate my EMIs?
The EMI is basically principal that goes towards the amount you borrowed and the interest on the borrowed amount. It is evaluated by taking into consideration the loan sum, the tenure chosen and the current interest rate. And outstanding amount gets adjusted every month accordingly.
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