Home Loan Eligibility

Home Loan Eligibility

You can get a home loan ranging from a minimum of Rs 5 lakh to a maximum of Rs 15 crore, based on your repayment capacity and the cost of the property. You will be eligible for a maximum of 80% of the cost of the property or the cost of construction as applicable and 65% of the cost of land in case of purchase of land.

You can get a loan of up to 80-90% of the cost estimates as certified by an engineer/architect and duly verified by the Technical Officer, subject to maximum 90% of overall market value of the property, whichever is lower on loan amount. Get a higher loan amount from by including an earning co-applicant.

The actual Home Loan amount is determined taking into various factors such as:

Age 
Home loan borrower must fulfill the age criteria which is variable depending upon the banks. Your age should be between 23 and 60 years at the time of loan maturity.
Income :
A regular and good source of income is one of the most important factors that a borrower can get higher loan amount. Individuals drawing a smaller salary will get a smaller loan. Likewise, individuals with a higher salary will get a bigger loan. To apply home loan excluding variable pay minimum Rs 25,000 net take home salary is required. If you are self-employed, in that case your annual profit would decide your home loan maximum eligibility.

Nature of Employment:
Bank will check whether you are salaried or self-employed. If you are a salaried. The brand value of your Company can help you with your Home Loan application

Job Stability
A good job stability is a very crucial aspect for Home loan consideration. A salaried person who has minimum 3 years of professional service with 1 year in the current profession can get a hassle-free loan. These numbers are flexible though, varying from bank to bank. Bank might be hesitant to grant a loan to a fresher. If the applicant is self-employed minimum 5 years of Work experience is required.

Relationship with the Bank
Having a healthy relationship with the banks can be helpful when applying for a home loan. Since there are chances that the borrower can get the higher loan amount. It’s always good to first check Home Loan interest rates at the bank you regularly transact.

Credit or CIBIL Score:
The CIBIL Score plays a critical role in the loan application process. Whenever you apply for a loan, lenders check your CIBIL Score and Report. If the credit score is low, the lender may not even consider the application further and reject it at that point. If the credit score is high, which automatically help in availing you the maximum loan amount. Delays and defaults in paying EMIs for loans or credit cards will lower your eligibility. So, always try to maintain a good CIBIL score, i.e. 750 or above out of 900 to increase your loan eligibility.

Income of co-applicant/s
Adding a co-applicant increases your eligibility for home loan as it increases your repayment capacity. The co-borrower you add should have good income, low obligation and clean CIBIL record. Although, banks allow only certain relationships to become the co-applicant. In this category friends and relatives who are not in direct blood relation are not eligible.

Value of property:
Bank will not finance the entire property value. The maximum home loan eligibility would depend upon the value of the property. You can get a loan of up to 80-90% of the cost estimates as certified by an engineer/architect and duly verified by the Bank Technical Officer.

Property documents:
Property is located in an approved area without any legal disputes. Any unsettled disputes with the property can lead to rejection of the loan. If the property is meeting the technical and legal terms and norms of the bank then only your home loan will get approved.

Methods of Calculating Home Loan Eligibility

  • FOIR (Fixed Obligation Income Ratio)

In this method, your loan amount eligibility is calculated on the basis of maximum EMI or monthly installments in respect to net income. Banks or NBFCs generally accept 40 – 70% of your net income as EMI, existing obligations and credit card outstanding. If the obligations exceed bank’s norms, then bank will either reduce your loan amount or will increase the tenure of your loan.

DETERMINATION OF ELIGIBILITY – Case 1

  • Income :   50,000
  • Total EMI’s being paid :   10,000
  • EMI to Income Ration : 20% [10,000 / 50,000]
  • Rule of thumb EMI to Income Ratio: 50% [lenders assume you will need half salary for living expenses].
  • Total Borrowing Capacity : 50% *    50,000 =   25,000
  • Total Incremental EMI that individual can afford :  25,000 –   10,000 =   15,000
  • Basis this EMI, total additional loan that may be sactioned at an interest rate of 10% over 20 years =   15,00,000
Loan application is likely to get approved

DETERMINATION OF ELIGIBILITY – Case 2

  • Income :   1,00,000
  • Total EMI’s being paid :   50,000
  • EMI to Income Ration : 50% [50,000 / 1,00,000]
  • Rule of thumb EMI to Income Ratio: 50%
  • Total Borrowing Capacity : 50% *    1,00,000 =   50,000
  • Total Incremental EMI that individual can afford :    50,000 –   50,000 =   0
  • Basis this EMI, total additional loan that may be sanctioned at an interest rate of 10% over 20 years =   0
Loan application is likely to get rejected