A home loan is a major financial commitment considering its high value and long repayment period. However, among others, housing loan eligibility plays a determining role in loan approval and available funds.
Lenders extend this credit only after thoroughly checking the requisites, which includes several parameters. Hence, individuals intending to apply for this credit should be aware of common as well as lender-specific eligibility criteria.
An overview of housing loan eligibility criteria
Primarily, the housing loan eligibility is different for salaried and self-employed individuals. Although it changes across lenders, following are some common parameters that individuals need to consider:
- The age should range between 23 and 62 years.
- Must be a residing citizen of India.
- Should have work experience of at least 3 years.
- Applicants must be residing citizens of India.
- Should be aged between 25 and 70 years.
- Must have business continuity of at least 5 years.
You can simplify the process and check the maximum loan amount you are eligible for by using an online housing loan eligibility calculator. Almost all reputed financial institutions offer this tool to help borrowers.
You only have to enter the following variables to check the eligibility:
- Net monthly salary
- Other monthly income
- Current obligations/EMIs
Within seconds you will get to know the maximum amount you are eligible for against the tenor chosen. Hence, with this tool, you can calculate your home loan eligibility in just a few clicks.
However, individuals should also know the factors influencing housing loan eligibility to be on the safer side.
Factors influencing home loan eligibility
Following are some key factors that determine the home loan eligibility:
- Credit score and history
Besides eligibility, the credit score and history also determine the housing loan interest rate offered to you. Before approving a home loan, lenders check your repayment history, type of credit availed before, credit card dues, etc.
Generally, a credit score of 750 and above is considered ideal to qualify and get the best deals on this advance. The existing borrowers can also opt for a home loan balance transfer by maintaining a high credit score and smooth repayment history. It helps reduce interest burden to a great extent.
- Employment status
The status of applicant’s employment also influences the housing loan eligibility. For instance, individuals working at a reputed MNC or a public or private company for considerable years are likely to get better deals on a home loan.
Similarly, a self-employed individual with a steady monthly income is likely to qualify for higher LTV than those with unstable income.
- Disposable monthly income
Since living costs vary across cities, individuals need to meet the income criteria to qualify for a substantial home loan. For instance, for residents of cities like Kolkata, Hyderabad, Gurugram, etc., monthly income needs to be Rs.25,000 or more.
- Existing debts
Besides monthly income, the current liabilities of applicants also determine the housing loan eligibility. Irrespective of the monthly income, the debt-to-income ratio should not exceed 40% of total income. Note that while calculating this ratio, one needs to include the expected EMI of the loan yet to get.
Since higher DTI indicates lower disposable income and vice-versa, it affects the eligibility.
- Property details
The current valuation of property also determines the home loan eligibility. For instance, lenders reward borrowers with competitive interest rates if the chosen property has the potential to increase its value in future.
Individuals also need to know the documents required for their home loan approval. Although it varies with lenders, following are some common documents that borrowers need to submit. It includes:
- Identity proof
- Address proof
- Bank account statements of last 6 months
- Salary slip/ Form 16
- Proof of income from business
- Photograph of applicant
- Property papers like title deeds
Note that only after assessing the documents, the lenders approve and disburse the loan amount. You can expedite the home loan process with pre-approved offers.
Selected HFCs also provide pre-approved offers that make loan processing simple and quick. These offers are available on a host of financial products like home loans, loans against property, etc. All you have to do is enter your name and contact number to check your pre-approved offer.
These are some crucial factors and details that individual need to know about housing loan eligibility. However, one should check the repayment capacity and total borrowing cost before deciding the loan amount.
Author Bio: Hi, I’m Pooja and I’m a passionate Blogger, Freelancer, Writer, and Digital Marketer. and I love tech stuff and games.