Taking a home loan to buy your dream house is a viable option to manage your finances when you do not have other means, but a home loan is not as easy as it sounds. You will need to conduct exhaustive research and be well-informed about how it works. Before applying for a home loan, you will need to ensure that you meet your lender’s eligibility criteria.
Home loan eligibility refers to the principal loan amount that you can get to buy your house. It indicates if you are eligible for a home loan. Your lender considers several factors in determining your eligibility, such as your age, income, credit score, employment type, age and location of the property, etc.
The eligibility criteria vary across lenders, so you will have to check your lender before applying for a home loan. Here are the requirements that are common across all platforms:
- You must be an Indian citizen working as an employee of an organization or a self-employed professional.
- You must be 18 years of age at the time of application submission and not more than 65 years of age at the end of the loan tenure.
- You must earn a minimum net monthly salary of Rs. 25,000 as a salaried person.
- As a self-employed person, you must show a minimum yearly profit as per industry or profession.
- You must hold a minimum of two years of work experience as a salaried individual and three years as a self-employed professional.
- You must possess a minimum CIBIL score of 700.
It is worth noting that your home loan eligibility may alter based on the age and location of the property that you wish to buy.
What are the Factors that Help to Improve your Home Loan Eligibility?
- Stable household income
- Good credit history
- A healthy credit score
- Timely repayment of all EMIs and credit card bills
- No history of defaults for credit cards or any other loans
- Co-applicant with good income and credit score
- Minimum credit limit utilization
- Fewer dependents
- Regular rental income
What are Ideal Ways to Improve your Home Loan Eligibility?
Several factors go into enhancing your eligibility to secure a favourable home loan:
- Opt for prepayment
A great way to enhance your home loan eligibility would be pre-pay / foreclose your existing loans before applying for a new home loan. Having an existing loan in your name may cause a reduction in the maximum home loan amount you may be eligible for, or elicit a higher interest rate. Your lender will assume that you already have a debt to deal with. If the sum of your existing EMIs and the monthly EMI you would have to pay as a result of the new home loan is more than 60-70% of your monthly income, your lender may even reject your home loan application.
- Maintain a healthy credit score
Your CIBIL score is a crucial factor considered by lenders to determine your creditworthiness. It helps lenders decide whether to approve or disapprove your loan. If you have a credit score that is above 700, you have a much higher chance of being considered a risk-free borrower by most lenders. Having a healthy credit score enables you to secure a home loan, and you may even get the lowest home loan interest rates possible.
- Longer loan tenure
As a rule of thumb, lenders prefer borrowers who wish to pay their EMIs within a longer loan tenure. The reason can be attributed to the fact that borrowers will have enough time to repay the loan amount without any delays. A home loan with an extended repayment tenure enables you to repay it on time.
One can use the home loan emi calculator online to understand the loan tenures. So, if you wish to reduce your EMIs, you can opt for a longer loan tenure. But, if you want to decrease your overall interest and repay your loan as quickly as possible, you should opt for a shorter loan tenure. This is definitely recommended as long as it doesn’t stretch your monthly budget.
- Add a co-applicant
If your spouse is currently working with a reputed company and has a good credit score, it would be wise to add them as a co-applicant. The benefit of having a co-applicant is that you can secure a higher loan amount. You can have more than one co-applicants. You will have to keep in mind that your spouse, family members, and siblings can be your co-applicants. Adding your family members as your co-applicants increases your home loan eligibility.
- Declare additional incomes
By declaring additional sources of income, your repayment capacity increases significantly, and your eligibility for a home loan will also improve.
