Home Loan Eligibility
Housing Loan Eligibility Criteria
| Minimum and Maximum Age |
- 18 - 70 years. However, some banks different minimum and maximum age for salaried, self employed and self employed professionals
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| Net Monthly Income |
- Net monthly income should be more than Rs. 25,000.
- In case your net monthly income is between Rs. 25,000 – Rs. 40,000, you may be eligible for loan if your fixed obligations (rent, EMI) do not exceed 50% of income.
- For net monthly income greater than Rs. 40,000, you may be eligible for loans if your fixed obligations do not exceed 65% of income
- For salaried persons, regular and timely salary credit is important for loan eligibility
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| Loan Tenure |
- Maximum loan tenure up to 30 years. However, some banks restrict loan tenure to 25 years
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| Interest Rate |
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| Company, Employment history |
- Income history and job continuity of 3 years and more required (except for some professionals)
- Company or sector in which you work should not be black listed by bank
- Some professionals such as practicing lawyers, police personnel, builders may be considered as negative profiles by some banks
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| Higher Eligibility with Co - applicant |
- Adding an earning family member as a co- applicant can increase your housing loan eligibility.
- Banks can add upto three or four family members or firms or companies owned by applicants as co-applicants
- Eligible co-applicants include direct family members such as spouse, parents, siblings and children.
- Indirect family members like cousins, distant relatives and friends cannot be considered as co-applicants
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| Current EMI’s |
- Monthly EMI of existing loans reduces the new EMI that you can afford to pay.
- In some cases, it may be possible to increase eligibility by repaying loans with balance tenure of less than 10 years
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| LTV | Banks only fund 75% to 90% of the total cost of the house. The maximum loan to value of the property or LTV specified by the RBI is as below:
- 90% LTV for loans upto Rs. 30 lakh for buying affordable segment homes
- 80% LTV for loans above Rs. 30 lakhs and upto Rs. 75 lakhs
- 75% LTV for loans above Rs. 75 lakhs
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| CIBIL score and Credit report |
- Home loan is a form of secured loan. Hence, CIBIL score is one of the criteria but not the only criteria, on which banks will decide your loan eligibility.
- Generally banks require a CIBIL score of 700 and above
- But if your CIBIL score is low, then you can be eligible for Home loan from some banks and housing finance companies with some additional conditions, higher rate of interest and higher margin.
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| Property approval and valuation |
- The builder and property against which you are taking loan should be approved by banks
- For property being bought in resale, banks get a valuation report from an independent valuer. For higher ticket size loans (Rs. 1 cr and above), banks may get valuation reports from two independent valuers and take an average of the two to arrive at value for the purpose of calculating maximum loan eligibility based on LTV
- For arriving at property value of under construction property being bought from a builder, most banks include basic cost, development charges, preferred location charges and cost of parking in cost but do not include heads like stamp duty, club charges, registration charges, maintenance charges, security deposit etc. Service tax and VAT are included in cost by some banks and home finance companies but not by all banks.
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Housing Loan Eligibility – Tips
- Apply with a co-applicant: You can boost your eligibility by adding an earning spouse or your parents as a co-applicant. Taking a joint loan with the co-applicant increases your income and eligibility to borrow more money. Suppose, your monthly income is Rs. 30,000 and the loan amount you are eligible for is Rs. 15 Lakh, If you add your spouse as co-applicant, earning Rs. 20,000 per month, can increase your eligibility to Rs. 25 Lakh. So, it is advised add a co-applicant, wherever possible, to improve your eligibility.
- Clear your existing debts: If you have running loans and you are paying other EMIs because of which your loan amount eligibility is low, you may want to prepay some of your existing debts to improve your eligibility. Say, your monthly income Rs. 35,000 per month and you have a credit card outstanding of Rs. 10,000. In this case, your eligibility decreases as your FOIR is calculated on your income left after paying obligations. So, pay your credit card dues and then apply for a fresh loan for higher loan amount
- Increase loan tenure: Apply for a tenure which is maximum to your age. If you apply for housing loan for 30 years, it will enhance your eligibility as the EMIs go down. In this case, however, you will end up paying more interest by the end of the tenure. In contrast, if you take loan for 10 years tenure, you might be eligible for a lower loan amount.
- Complete market research: One must do complete market research as the home loan interest rates keeps on fluctuating. Fixed rates remain same during the tenure and floating rates change with change in MCLR or base rates. It is important to study the changes in home loan rate of various banks in response to MCLR to understand the responsiveness of banks to market rate changes.
- Other income source: Higher income enhances your eligibility. If you are earning income through other sources such as rent, then don't forget to mention the income with complete proof as it can increase your eligibility for a high loan amount.
Illustration – Mr. A, 30 years old, wants to purchase a home whose property value is Rs. 60 Lakh, His net income is Rs. 50,000 per month and he has no other fixed obligations. Banks will calculate Mr. A’s loan amount eligibility based on his age, net income and his fixed expenses as a % of his net income. Based on the loan amount Mr. A is eligible for, he will be offered home loan rate corresponding to the slab he falls in and that will be used to calculate his EMI. In Mr A’s case, he will get the following results for various banks on a home loan eligibility calculator.
| Bank | Loan Amount Eligibility | Interest Rate | EMI |
|---|
| SBI | Rs. 45.61 Lakh for 30years | 8.55% | Rs. 35,235 |
| HDFC | Rs. 34.88 Lakh for 30years | 8.60% | Rs. 27,070 |
| ICICI Bank | Rs. 43.09 Lakh for 30years | 9.05% | Rs. 34,829 |
| Axis Bank | Rs. 43.82 Lakh for 30years | 8.90% | Rs. 34,944 |
| PNB Housing Finance | Rs. 43.09 Lakh for 30years | 9.05% | Rs. 34,829 |
| DBS Bank | Rs. 41.05 Lakh for 20years | 9.50% | Rs. 38,266 |
| DHFL | Rs. 40 Lakh for 30years | 9.75% | Rs. 34,366 |
| IDBI Bank | Rs. 44.57 Lakh for 30years | 8.75% | Rs. 35,064 |
| IDFC Bank | Rs. 41.71 Lakh for 30years | 9.35% | Rs. 34,617 |
| Indiabulls | Rs. 35.68 Lakh for 25years | 9.25% | Rs. 30,552 |
- As you can see in the above table, loan amount eligibility differs for different banks. Hence, it is extremely important to compare the eligibility terms and interest rates of different banks before choosing the bank to borrow from.
- Banks offering highest eligibility of Rs. 45.61 Lakh are SBI.
- Minimum eligibility of Rs. 34.88 Lakh is offered by HDFC.
- EMI amount ranges from Rs. 27,070 to Rs. 38,266 at different interest rates offered by banks
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