Home Loan Eligibility Overview:
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.
Home Loan Eligibility Calculator
Approvals are based on borrowers’ incomes, credit profiles and existing relationships with the bank
- Eligibility criteria differ for each lender.
||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
|Status of Residence
||At least 1 yr. at current place of stay
||Good rating as per recognised credit bureau
|Type of property being purchased
||Affects loan amount eligibility
Home Loan Documentation:
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
Examine your Eligibility:
You must meet certain organizational requirements to prove that you are indeed cut out for the amount you seek. A home loan eligibility criteria specification list is compiled below to give you an idea regarding the same though these might differ from bank to bank.
- ID Proof: Any photo and signature-bearing national ID (Election ID, Aadhaar, PAN Card, Driving License etc.) to prove that you are resident/ citizen./li>
- Age Proof: You must be aged 21 and above but no more than 70, though this can vary. SSLC Book, Birth Certificate and aforementioned IDs could serve as proof of age.
- Income Proof: Lenders look into your income, whether it is salaried, entrepreneurial or others for which you will have to submit IT Return paper, bank statements, salary slips etc. Banks follow a standard procedure for people with different income. If you want more money than permitted as per your income, you must add a co-applicant or have a guarantor approved by the bank.
- CIBIL Report: Your most recent credit score should be at least 750 and above.
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.
Ways to increase eligibility:
- Maintain a good credit score - healthy repayment habits on credit cards and existing loans
- Display stability in income, employment, residence
- Include co-applicants to supplement income
- Provide a guarantor to improve credibility
- Repay existing loans
- Buy top-tier properties/ buy from reputed builders
- Buy a new property vs. old one
Check Your Home Loan Eligibility:
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.
Guaranteed to Work Tips to Boost Your Home Loan Eligibility:
Browsing and picking a suitable home loan might appear tedious and baffling. But if you can be a tad organized, you could be moving-into your new home in no time. First, let us ensure that you meet the eligibility criteria given by the chosen bank. If not, don’t worry. There are many tried-and-tested ways to increase your home loan eligibility. Shall we delve into the details?
i. Increasing Loan Term:
Going for the maximum tenure offered by the bank is one of the obvious and quickest ways to enhance your eligibility. This is because the EMIs go down as the term goes up. However you will end up shelling out more interest by the end of the tenure.
ii. Take calculated and well-thought-out decision:
Home loan interest rates will keep fluctuating. But if you study the trends carefully, you will be able to spot certain patterns (be it fixed or floating rates).
iii. Settle other existing loans if you can:
In case of an outstanding vehicle loan, property loan or personal loan, try to settle them at the earliest. This can act as an assurance to the bank that you are quite capable of repaying their money.
iv. Do you have a co-applicant?
Having a co-applicant, a working one at that, can solve all your problems regarding eligibility. Banks are generally more trusting towards joint home loan applicants.
v. Club the entire family’s incomes together:
If you can show your father’s, your mother’s or your spouse’s income, it will also put an end to the eligibility hurdle.
vi. Don’t forget to mention other source of income:
Bonuses, variables in the net income and commissions from clients can also be mentioned with proofs to make yourself more eligible for the amount you are planning to avail as loan.
FAQs (Frequently Asked Questions):
- 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.