Everyone dreams of having their own house at some point in life. However, buying a new house can be expensive and you might need a home loan to obtain your new house. Moreover, in order for a bank to approve your home loan application, there are some requirements that you need to meet. If you are able to meet the qualifying conditions, the bank will sanction your loan amount. This also adds up to your creditworthiness as the bank believes that you would not default on the home loan. However, if you are not able to fulfil the eligibility requirements, the bank would reject your loan application, which can have a negative impact on your credit profile. Similarly, having a good credit score and history can make you eligible to apply for the best home loans in India.
Various banks charge different interest rates on home loans on the basis of the applicant’s profile. The bank determines the interest rate on a home loan application depending on the applicant’s eligibility. Age, income, credit score of the applicant, etc are important aspects that play a role in determining whether or not he is eligible for a home loan. Each bank has its own set of standards for qualifying. However, the general eligibility requirements are the same across all the major banks of India. The standard home loan eligibility criteria is as follows:
Home Loan Eligibility Criteria
The basic eligibility criteria for most of the banks in the country is as follows:
|Age Limit for Salaried Applicants||23 Years to 62 Years|
|Age Limit for Self-Employed Applicants||25 Years to 70 Years|
|CIBIL score||750 or above|
|Work Experience for Salaried Individuals||Minimum 3 Years of Work Experience|
|Business Background||Should have a minimum of 5 Years of Stable Business|
|Applicant’s Income||Must have a salary of INR 25,000|
|Nationality of the Applicant||Applicant should be a citizen of India|
Apart from these basic requirements of a bank for obtaining a home loan. The maximum home loan limit for salaried employees is INR 3.5 crore in India based on the applicant’s eligibility, whereas, the maximum limit for self-employed individuals is INR 5 crore on the basis of applicant’s eligibility.
How do Banks determine Home Loan Eligibility
Following are the three factors that banks use to determine your eligibility for a home loan:
1. Debt-to-Income Ratio
The lender will consider all of your previous loans and how much you owe on them, as well as the house loan you’ve applied for.
2. Return on Investment (ROI)
If your monthly expenses are nearly half of your income, the ratio indicates to the bank how much of your income you should set aside for loan repayment.
3. Loan to Cost Ratio
This ratio indicates how much of the property is financed by the bank and how much by you. It’s a method of calculating how much equity you have in your home.
How to Improve Your Eligibility for a Home Loan
There are various measures that you can apply in order to improve your eligibility for a home loan. High home loan eligibility can make you able to apply for the best home loan. The steps to increase your home loan eligibility are as follows:
- Make a working family member, such as your spouse, a co-applicant for the loan.
- Contact your lender to check if a structured repayment plan is available.
- Make sure you have a steady source of income, as well as regular saves and investments.
- Provide specifics on your frequent alternative sources of income, such as rental income from a separate property, revenue from a firm other than your current one, and so on.
- Maintain a record of variable compensation components such as bonuses, commissions, and overtime.
- Examine your CIBIL score and make any modifications necessary to enhance or correct any issues.
- Ensure that any outstanding debts and short-term obligations are paid.
It is advisable to check your eligibility before applying for a home loan in order to avoid rejection. Multiple loan rejections or applying for multiple loans at the same time can have a negative impact on your credit score. Moreover, if you are struggling to qualify for a home loan you can use the above mentioned points to increase your home loan eligibility.