Owning a home is a dream that almost everyone harbours at some point or another throughout the course of their lives. While it can certainly be a daunting prospect, especially from a financial point of view, it can certainly be overcome with the help of a Home Loan and some careful financial planning on your part.
Additional Reading: Home Loans Are Cheaper Now. Make The Most Of It
However, before you can even think about applying for a Home Loan, you need to find out if you meet the eligibility criteria required to actually do so. So, without further ado, here’s all you need to know about ‘Home Loan eligibility’ and the factors that you need to take into consideration before taking your first step towards owning a home of your own.
Home Loan Eligibility Criteria
While eligibility criteria for Home Loan may differ from lender to lender, the general consensus is that loan approvals are mainly dependent on the income of the applicant, his or her Credit Score and history, and their current relationship with the bank they’re applying at.
To apply for a Home Loan, the following criteria generally has to be met:
| Age | Minimum: 21 years old
Maximum: 65 years old |
| Income | Most banks require an average net annual income of Rs. 5 -7 lakhs. But, there are also banks that offer Home Loans to those earning as low as Rs. 10,000 per month. |
| Employment Type | Salaried / Self-employed |
| Employment Status | Must be currently employed, with at least 1 year in the current job. Minimum of 2 years of previous employment |
| Residence Type | If you already own a house that you’ve given out on rent, it will help your improve your eligibility |
| Residence Status | Minimum 1 year at current residence |
| Credit Rating | 750 and above |
Additional Reading: The Beginner’s Guide To Taking A Home Loan
Factors That Affect Home Loan Eligibility
- Age
Age is probably the most important and influential factor that determines whether a bank or a lender will consider your application for a Home Loan.
Usually, the younger you are the easier it is to get a Home Loan for a substantial tenure. For example, if you happen to be in your 20s or early 30s, you should be able to get yourself a Home Loan with a tenure of up to 25 years with relative ease.
However, individuals over the age of 40 could find it difficult to get a Home Loan with a longer tenure.
- Income
In order to get yourself a Home Loan, you must earn a regular income. This shows that you have the capacity to pay back the loan amount the bank has sanctioned.
You could be a salaried individual employed with a private organisation or with a government agency, an independent professional such as a doctor, consultant etc or a self-employed individual running your own business or company.
Regardless of which category you fall under, as long as you can prove that you earn a steady income, banks will consider your Home Loan application provided you meet all the other relevant conditions.
- Loan Tenure
The longer Home Loan tenure you choose, the more your eligibility improves. A longer loan tenure means smaller EMIs, making it easier to manage your repayments.
This is an attractive proposition for most banks. However, keep in mind that longer tenure also mean that you will be paying a higher amount in interest.
- Credit Score
Your Credit Score plays a major role in acquiring a Home Loan. It is one of, if not THE most important factor when applying for a loan. A good Credit Score and repayment history can help you land a Home Loan without any trouble.
However, a low Credit Score could lead to banks sanctioning a lower loan amount or declining your loan application altogether.
- Additional Debts
Another important factor that could influence your Home Loan eligibility is if you happen to have any additional or outstanding debts to your name.
Before a bank issues a loan, they refer to the central database maintained by the Credit Information Bureau of India (CIBIL), which will give them detailed information regarding all loans and dues of an applicant.
Remember, even outstanding Credit Card dues could adversely affect your Home Loan eligibility, so make sure you’re on top of it before applying for a loan.
- Employment Sector
While it is true that if you’re a salaried or self-employed person with a steady income, you fulfil one of the main conditions required to apply for a Home Loan, however, your employment sector matters too. Banks consider certain employment sectors riskier than others and are sometimes hesitant to lend to customers from these sectors.
Also, if your company is going through a rough financial patch or has been involved in a legal hassle of some kind, then this too could place pressure on your eligibility for a Home Loan.
Banks also maintain a separate list of A, B, C companies to which they offer lower and better interest rates when compared to smaller or lesser-known companies. So, it isn’t just your salary, but your company too which plays an important role in your Home Loan eligibility.
Additional Reading: 3 Ways To Improve Your Credit Score Quickly
How To Improve Your Home Loan Eligibility
Now that you know all about the factors that affect your Home Loan eligibility, here are a few tips on how you can enhance your Home Loan eligibility:
- Clear Outstanding Dues
Make sure that all your old loans or outstanding debts have been cleared before you apply for a Home Loan. This will improve your Credit History as well as score, which will go a long way towards improving your chances of landing a Home Loan.
- Make Timely Payments
Even if you do have other loans or even Credit Cards, make sure you are making regular payments every month without fail. Stay consistent and don’t default on any of your payments.
- Opt For A Longer Tenure
Choose a longer loan tenure so that you aren’t burdened by heavy EMIs. This will certainly increase your chances of getting a Home Loan.
- Co-Applicant
If you apply for a joint loan with another family member, who is also earning a steady income, your eligibility for a Home Loan will increase.
How To Calculate Your Home Loan Eligibility
A simple way to figure out whether you are eligible for a Home Loan or not is by utilising our online Home Loan eligibility calculator. This will help you get an overview of your loan as well as the EMI amounts that you will need to repay.
Using this tool, you will know whether you’re eligible for a Home Loan, the amount of loan you are eligible for and the approximate monthly repayment amount. In fact, you will also get multiple quotes from different banks for easy comparison.
Additional Reading: Home Loan EMI Calculator: How It Works
Now that you have all the information you need regarding Home Loan eligibility, take some time out to make sure you tick all the boxes before you apply for a Home Loan.