Home Loan Eligibility

Home loan eligibility criteria has common parameters across all banks and Non-Banking Financial Companies (NBFCs). However, there could also be specific criteria that is applicable for each lender according to their requirements. Understanding the criteria that is required to be eligible for a home loan helps to ensure that the process of application becomes smoother and easier for you.

Note: Loan eligibility criteria differ depending on a bank/lender.Approvals are based on borrowers' income, credit profile, and existing relationship with the bank.

Home Loan Eligibility Calculator

Minimum Home Loan Eligibility for Top Banks in 2022

Once you have figured out your eligibility for a home loan, you can check home loan interest rate for all banks and apply for the one that suits you best.

How to Check Home Loan Eligibility with BankBazaar?

Use the home loan eligibility calculator to check which are the banks you are eligible for a home loan. You can easily compare and choose the best home loans with the help of the home loan eligibility calculator available on BankBazaar. The process is simple and only basic details will need to be entered.The procedure to check your eligibility via BankBazaar.com is mentioned below:

1. Visit BankBazaar Home Loan Eligiblity
2. Choose your type of employment from the options that are provided.
3. Enter your gross fixed monthly income and click on ‘Continue’ on the next slide.
4. Enter the PIN code of your current residential address.
5. On the next slide, choose the purpose of your home loan.
6. Enter your mobile phone number.
7. Check the box to authorise contact permissions.
8. Enter your full name, date of birth, and email ID in the designated fields and click on ‘Continue’.
9. Enter the OTP sent to your mobile phone number and click on the ‘Submit’ button.

After this step, you will be able to check all the home loan offers that you are eligible for and apply for a home loan. You can also consider using the BankBazaar Home Loan EMI Calculator to calculate your effective EMI amounts for the home loan product that you want to choose.

How Home Loan Eligibility is Calculated?

Chandra Patra is an employee of a leading company in India. His salary break up is mentioned below:

Let us consider that Chandra has no loans or liabilities at present and his net available income is Rs.1,03,400. However, you must always remember that the Leave Travel Allowance is not taken into consideration by the bank when 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.

What are the Factors Affect Home Loan Eligibility

• Age Limit: It 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.
• 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 insist 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.
• Rate of Interest: Home finance eligibility is always inversely proportional to the rate of interest. If the rate is higher, eligibility will be less and vice versa.
• Loan Term: If you opt for a longer tenure, your eligibility will improve. EMIs too will be lesser and manageable. But the downside to this is, you will end up paying more interest.
• 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.
• CIBIL Score 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.

FAQ

1. How to Check Home Loan Eligibility Based on Salary?

   As mentioned earlier, the home loan lenders determine the eligibility of an applicant for home loan on the basis of their monthly income (in addition to other factors). The salary is taken into consideration to identify the loan repayment capability of the applicant. The LTV ratio or the Loan-to-Value ratio is used to assess the risk factor involved in the case of a loan disbursal.

2. How to Check Home Loan Eligibility for Salaried and Self-Employed?

   The eligibility criteria for home loans differ slightly for salaried and self-employed employees. For most lenders, the requirement in regard to the age bracket, residential status, credit score, etc. are usually the same for both salaried and self-employed employees. However, the requirement in terms of the overall working experience and minimum income can differ. On the basis of your employment status, you can get in touch with your lender and find out the requirement for the minimum work experience and the minimum income.

   If you are a salaried individual working in a private company, you can check how private employees can get home loan.

3. What are home loan eligibility Documents?

   The list of documents required at the time of applying for a home loan application can vary from lender to lender. In general, an applicant will be required to provide the following:

   • Recent passport sized photographs
   • Proof of residence
   • Proof of identity
   • Bank account statements
   • Home loan application form and so on.

   However, you can check the list of home loan documents required for different types of applicants and apply for your loan accordingly.

4. What is the role of co-applicant in home loan eligibility?

   You can avail a home loan along with a co-applicant to increase the chances of the loan approval. The main role of a co-applicant is to repay the home loan along with you (if you are the main borrower).

   Many banks make it mandatory for co-owners to be co-applicants for home loans. Here is all you need to know about co-borrower vs co-owner vs co-applicant.

5. What are the eligibility criteria for home loan Subsidy?

   The Central Government, through the Ministry of Housing and Urban Poverty Alleviation, has launched the Pradhan Mantri Awas Yojana scheme under which beneficiaries can avail subsidies on their respective home loans. As per the terms and conditions of the PMAY scheme, applicants will be categorised under 4 broad categories – EWS, LIG, MIG 1, and MIG 2. PMAY eligibility criteria for these groups are decided on the basis of the annual family income.

6. What are the Minimum home loan eligibility requirements for an NRI?

   In general, the home loan eligibility criteria for NRIs are in line with that of the general public. In order to avail an NRI home loan, the applicant should be a salaried or self-employed individual, with a good credit score. He or she should be within the age bracket of 18 years to 70 years and must be a Non-Resident Indian or NRI.

   There are a number of lenders in India who offer home loans for NRIs.

7. How to improve home loan eligibility?

   Home loan eligibility cannot be assessed easily. For most lenders, the conditions may vary. In addition to that, 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.

   You can follow some important tips to improve your home loan eligibility.

8. What factors are considered by a lender/bank while approving a home loan?

   There are several factors that are considered by banks or lenders to determine if you are eligible for a loan. These factors are mentioned below:

   • Applicants age.
   • Applicants income level.
   • Qualification of the applicant.
   • Income level of spouse.
   • Resident status.
   • Existing loan status.
   • Credit score and credit history.
9. Can I get a top up loan in addition to my existing home loan?

   Yes, you can get a top up loan in addition to your existing home loan. However, in order to be eligible for the same, you will be required to make regular repayments for your existing loan.

10. Can I borrow loan for under construction property?

    Yes, you can avail housing loans for under construction properties. However, it should be kept in mind that the amount will be disbursed in instalments as per the assessment of the lender.

    Here is all you need to know about how LTV ratio is used to determine home loan eligibility.

11. Who are eligible for a joint home loan?

    The eligibility for a joint home loan is dependent on the relationship of the co-applicants. The co-applicants have to be related in order to be eligible for a joint home loan.

12. Are my children eligible to be co-applicants for my home loan?

    Yes, your parents, children and spouse are considered eligible for being co-applicants for the home loan.

13. Am I eligible for tax benefits if I take a home loan?

    Yes, you can avail tax benefits when you take home loan from a bank or a financial institution under Section 80C and Section 24 under the IT Act.

14. Will I be eligible for a home loan if I have a bad credit score?

    In case you have a poor credit score, it will be difficult for you to get a home loan. Banks or financial institutions consider your credit report to be of great value while determining your eligibility towards a loan. If you have a good score, banks will be happy to offer you a home loan with attractive rates of interest. However, with a bad score lenders will doubt your repayment capability and might not consider you to eligible for a home loan.

15. Is it mandatory to have a co-applicant while applying for a home loan?

    Although there is no mandate for having a co-applicant for a home loan in India, most of the lenders (both public and private) insist on having one to ensure the guarantee in regard to the repayment of the loan amount. In addition to that, having a co-applicant while applying for a home loan will also boost your home loan eligibility. Nevertheless, it should be kept in mind that there is no legal requirement for having a co-applicant when applying for a home loan.

16. What is meant by the market value of a property?

    The price of a property which is agreed upon by both the seller and a buyer for a transaction is called the market value of that property. In easier terms, the price of the property at which the seller is ready to sell the property and a buyer is ready to purchase the property is the market value of the property.

17. What is the process of disbursement for an under-construction property?

    In the case of under construction property, the loan amount is disbursed by the lender in instalments and is based on the assessment of the lender and not the developer. The loan amount is disbursed on the basis of the progress of the construction of the property.

18. What does own contribution mean?

    Most of the lenders in India (both public and private) require you to provide an amount equivalent to 10% to 20% of the home loan amount as a down payment. This initial amount which is to be provided by you is called the own contribution. Here are some expert tips on how to get home loan on zero downpayment.

19. What security needs to be provided when applying for a home loan?

    Your lender might ask for security when you apply for a home loan. You can provide one of the following as collateral security for home loan eligiblity:

    • NSS or National Savings Certificates
    • Assignment of life insurance policies
    • Bank deposits
    • Mutual fund units
    • Other investments
20. Can I get a higher loan through my existing loan account to buy a new property?

    Yes, you can use your existing loan account to purchase a new property. However, this benefit will be offered as per the discretion of your lender. For example, HDFC Bank offers the ‘Home Conversion Loan’ feature which can be used to transfer the existing loan to buy a new property. In addition to that, you can also get additional fund for the new property as per your home loan eligibility.