Buying a house is everyone’s dream. With soaring real estate prices and limited liquidity, most people look out for home loans from banks and non-banking financial companies. This is because, these home loans cover 80% of the property cost and the borrower is required to pay only the initial 20% as down payment, with the remaining amount spread through 20-30 years depending on how long the borrower want to stretch your home loan to. Note that while buying a house, one also have to consider stamp duty and registration charges over and above property cost and this component doesn’t get covered in the home loan.
What is home loan eligibility?
To get a home loan, a person has to fulfil some requirements based on which the money lender decides if he/she is eligible for a home loan or not. This mandatory check is done by the home loan lending bank or NBFC. Only on the basis of the report can they grant or reject home loan to the borrower.
What are the home loan eligibility criteria?
The home loan eligibility criteria will differ from bank to bank. It may also be different for different NBFCs.
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Nationality and place of residence
The home loan borrower must be an Indian and place of residence should be India.
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Age
The present age and the remaining working years is very important when one applies for a home loan. The bigger the gap, the more chances are there for you to get a home loan and that too at an attractive rate of interest.
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Employment status
A person must be a salaried employee or self-employed
- A salaried employee asking for home loan should be between 21 years and 65 years.
- A self-employed person asking for home loan should be between 21 years and 70 years.
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Salary
This is a very important component that determines the amount of home loan that can be granted to a person. On the basis of this salary, the home loan lender will be able to calculate the tenure by which he can recover his money.
- The minimum salary of a person should be Rs 10,000 per month.
- The minimum business income should be Rs 2 lakh per annum.
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Credit score
The CIBIL score (credit score) is a three digit number that shows how much credit worthy you are. It ranges between 300 to 900 and anything more than 725 is ideal for getting home loan granted. For people with low CIBIL score, the rate of interest will be very high.
How can you use a home loan eligibility calculator?
There are a number of online home loan eligibility calculator available today. Most banks and NBFCs provide it online and you can use any of them to get an idea of how much home loan you are eligible for.
- First enter your gross monthly income
- Input the tenure of home loan that you wish to take
- Entre the interest rate
- Add the other EMIs that you may have
- Finally submit and you will get an idea of how much home loan you are eligible for and what would be the tenure.
How can one increase eligibility for home loan?
One can increase the eligibility for home loan by doing the following:
- Adding a family member’s name who is earning as a co-applicant for the home loan (joint home loan)
- Planning for home loan by ensuring steady salary income, planning investments and working on savings
- If the CIBIL score is not good or depreciating, work on it to improve it as one gets easy home loan with attractive interest rates when the CIBIL score is above 700.
- A person should not default on any loan that he has availed of in the past. It’s also a good idea to actually service all the existing loans that you may have taken
How is the home loan amount calculated?
The home loan amount that one will be granted depends on many factors and banks and NBFCs use different methods to calculate home loan to be granted.
- Property’s value,
- Repaying capacity of the borrower
- Tenure the borrower seeks for and the interest he will have to pay.
- Number of times the annual income of the borrower
- Percentage of the property’s cost
- EMI x tenure of the home loan
- CIBIL score
How to apply for home loan?
Once you are clear with the home loan eligibility, you can proceed with the home loan application. This can be done online as well as you can visit the branch of any bank or NBFC who will help you with the application.
Documents required to apply for home loan
- Home loan application form
- Address proof- Aadhaar card, Passport, Driving License, Electricity bill etc.
- Identity proof – Ration Card, Passport, Voter’s card, Aadhaar card, PAN Card etc.
- Proof of income for salaried employee- Salary slips of three months and bank account statements of last six months.
- Proof of income for self-employed people- Proof of business in terms of profit and loss statement (audited financial statement)
- Photograph of people taking home loan
- Form 16
- Income tax returns
- Processing fee cheque
Housing.com POV
Home loan is an important part of the property buying journey and one has to evaluate this in the same way he evaluates properties. It is important for a person to understand finer details about home loan, the eligibility criteria and what happens on defaulting on them before proceeding.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |