If you are considering buying a house and want to avail of a home loan for the purchase you make, it is important to consider your eligibility before applying for such a loan. Since the quotient of risk involved in sanctioning of home loans is high, Bank considers various factors before granting sanction to the application. Thus, for the purpose of availing a home loan, the applicants must fulfill certain eligibility criteria before applying for a loan.
The term Home Loan eligibility signifies whether the applicant qualifies to avail of a loan for the purpose of purchase of property and the extent to which (the sanctioned amount) the loan can be availed. The Banks determine the home loan eligibility and the sanctioned amount based on certain factors such as the age of the applicant, credit score, income, employment or type of employment, employer of the applicant, etc.
The eligibility criteria for availing the home loan are determined based on the following factors:
- Age of Applicant – The age of the applicant should be between 18 years to 70 years at the time of loan maturity.
- Net Monthly Salary – The net monthly salary of the applicant should be above Rs. 25000/- per month.
- Type of Loan – Loans can be granted to self-employed and salaried personal.
- Credit Score – The minimum credit score required to avail home loan by the applicant should be 750.
- The type of property purchased also alters the loan eligibility.
- Work Experience – The minimum work experience required to avail of home loans for salaried employees is 2 years and for self-employed, it is 3 years.
- It is not mandatory for the co-applicants to have a salaried or self-employed status.
How is the loan eligibility determined?
The loan eligibility of the applicants is determined based on the following factors
- Maintain a credit score above 750 – Banks consider the credit score to determine the willingness and the ability of the applicant to repay the loan through the credit rating. Usually, the loan is sanctioned to applicants having a minimum credit score of 750. Thus, the applicants must maintain a good credit score preferably above 750.
- Good Repayment History – Before granting sanction to the loan, the banks also consider the repayment history of the applicant. It is important that applicants have made regular repayment of their previous loans.
- Existing Loans or credit card dues – The overall loan eligibility of any individual is generally 50% of the income and the total loan obligations of the applicant should not exceed 50% of the income. Therefore, the banks consider the current loan accounts and credit card dues to determine the paying capacity of the applicant. It is important for the applicants to maintain a good balance in the number of loans availed and the income, fewer existing loans and dues would mean a higher sanction amount.
- Stable Financial Past – The applicant should have a stable financial history, stable jobs.
- Working spouse – If the spouse of the applicant is working, it gives an added advantage and boosts loan eligibility.
- Fewer Dependents – The number of dependents including parents and children also are a major factor in determining the loan eligibility.
- Regular rental income – A regular rental income is also a determining factor in the overall income of the applicant. Therefore, the loan eligibility is enhanced if the applicants have regular rental income.
- Credit Utilization ratio – The credit utilization ratio also affects the loan eligibility of the applicant.
How to raise the loan eligibility?
The applicants can take the following measures to increase their loan eligibility
- Pre-payment of existing credit card dues and loans – Depending upon the income, the loan eligibility is generally 50% of the total income of the individual. Any point the individual can avail of a maximum loan amounting to 50% of the total income from all banks. When the applicants repay the loan amount or credit card dues on time or prior to the due date, the total liability of the applicant decreases, and the loan eligibility increases.
- Opt for a longer loan tenure – A longer loan tenure decreases the monthly and yearly repayable amount of the applicant versus the income. Thus, the loan eligibility amount increases.
- Adding another source of income certainly increases the overall paying capacity of the applicant and the loan eligibility increases.
- Maintain a CIBIL score above 750 – The applicant must maintain a good CIBIL score by timely repayment of loans, less credit utilization ratio, etc.
- Include another working member in the loan application – Working spouse or parent or child can be an added advantage.