Knowing your eligibility for a loan before you apply is always a good idea. Unlike before when you needed to visit lenders and discuss everything for hours, you can easily do it online in minutes today. A Home Loan Calculator is an online tool designed to help calculate how much home loan one can qualify for. Banks consider several factors, including monthly income, loan repayment tenure, additional sources of income, and existing EMIs. The calculator then computes these fields to determine the eligibility for a home loan.
Ensuring that you can comfortably repay the home loan is essential to avoid the risk of rejection, which could negatively impact the applicant’s profile. Therefore, it is advisable to thoroughly check and meet all the requirements for home loan eligibility.
Let’s see these factors and how you can fall under these “eligibility criteria.”
Some Essential Factors for Home Loan Approval
When you apply for a home loan in India, several parameters are set by lenders to ensure you can repay the loan. These parameters include:
- Credit Score
Your credit score is one of the most essential home loan requirements set by lenders. A credit score is an overall report of your finances. It represents whether you are committed to paying your loan back on time. Your credit score is represented with a number between 300 and 900; the higher the credit score, the more your chances of getting a loan with attractive interest rates.
- Monthly Income
Having a stable income is crucial for home loan eligibility. Lenders are more likely to approve your loan application if you have a stable job and steady income.
- Loan Amount
Choosing the right loan amount based on eligibility makes managing EMIs easier and getting faster loan approvals. It’s essential to remember that even if you qualify for a higher loan, it’s better to borrow only what you truly need. A larger loan amount could lead to more challenging EMI payments. Moreover, missed or delayed payments can negatively impact your credit score and future borrowing options.
To determine the amount you can borrow. It’s simple to use and requires this information:
- Total monthly income
- Preferred repayment period
- Home Loan interest rate offered by the lender
- Other existing EMIs
Or just use an online EMI calculator.
- Loan Tenure and Age
Home loans can have flexible tenures that go into decades. However, the loan tenure you qualify for depends on your age at loan maturity. You might have a shorter loan tenure if your age is close to the maximum limit. For instance, if you are 58, the lender might offer you a maximum tenure of 4 years (considering the maximum age limit is 62 years), regardless of their overall maximum loan tenure.
- Outstanding Loans
It’s important to manage your existing loans well to maintain eligibility for a home loan. Banks recommend keeping the EMI (monthly loan installment) to Income Ratio between 50% to 60%. This allows room for future loans or to pay off any current debts. Having too many unpaid loans can reduce your eligibility.
Eligibility Criteria For Applying for a Home Loan
Most banks have standard home loan requirements, which are:
- If the applicant is a salaried individual, age must be between 23 to 62 years old.
- If the applicant is a self-employed individual, then age should be between 25 to 70 years old.
- The required CIBIL Score for both salaried and self-employed is 750.
- Work experience for salaried individuals should be at least three years.
- For self-employed individuals, the business must have been running for a minimum of 5 years.
- The minimum monthly income should be at least ₹25,000; it may vary depending on the lending amount.
- Only Indian and Non-Residential Indian (NRI) applicants are eligible for home loans in India.
Ways to Improve Housing Loan Eligibility
If you have checked your eligibility with a home loan eligibility calculator and are not eligible for a loan, try these tips to improve your chance of getting a loan:
- Consider applying for a joint home loan with someone else to enhance your eligibility.
- Get a well-structured repayment plan to showcase your ability to repay the loan.
- Maintain a stable income and try to make regular savings and investments.
- Share information about any additional sources of income you have.
- Keep track of the different components of your variable pay.
- Take steps to resolve any credit-related problems you may have.
- Pay off existing debts and short-term obligations to improve eligibility.
Having the right Home Loan eligibility can greatly impact your loan application. Lenders will offer you better loan options when you meet the necessary criteria. You may be eligible for larger loan amounts at lower interest rates with flexible repayment terms. However, if your eligibility falls short, improving it before applying for a home loan is essential to avoid rejection.