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Summary
The housing property an individual buying may be of 85 lakh and adding all other cost and taxes, he/she might need a loan for 1 crore. Even if they wish to avail 100% loan, but no lender will fund complete loan amount. One important factor in home loan is own contribution. Applicant has to bring in certain investment from his/her savings as own contribution for home purchase and rest might be paid by Home loan borrowing. Lenders evaluate applicant’s profile on several dimension to ascertain how much credit can be extended to them.
The loan eligibility in simple terms means how much loan can be extended to applicant by any bank or NBFC. Each lender has their pre-defined rule and qualification set to determine the loan amount. The percentage and computation assign to each factor may vary as per lenders respective internal policies, but the factors accounted by most lenders are common.
Home Loan Eligibility Checklist
Income
- The monthly or yearly income along with fixed variables if any. Income is the key component. For most bank, minimum income should start from Rs. 8000 per month. Lender calculates a certain multiple to your income to calculate your loan eligibility.
- E.g. – If borrower earn Rs. 50K a month with no other obligations and multiple as per lender policy is 60 times of monthly income, then they are eligible for Rs. 30L as maximum loan amount.
Existing Loan and EMIs
- If borrower have any existing Loans or EMIs running, it gets accounted and reduces your loan eligibility.
- E.g. – As per above income multiplier example, if borrower has other loan with Rs. 10K as existing EMI and Rs. 50K as income, then his/her current available income for Home loan calculation is Rs. 40K. Loan amount eligible will be Rs. 24L.
Age
- Minimum 21 years to Max. 70 years*. Lower your age, higher the tenure applicant can opt for. Factor here is repayment of loan should be done before retirement age.
- Only for applicant where retirement age is 75 or has a fixed recurring pension income and has a co-applicant
Tenure
- Maximum tenure can be 30 years.
Co-Applicant
- All above factors will be evaluated for co-applicant as well. A co-applicant with stable income, helps in addition of loan paying capacity and improves the multiplier calculation.
- E.g. – As per above income multiplier example, if borrower has other loan with Rs. 10K as existing EMI and Rs. 50K as income, then your current loan amount eligibility was Rs. 24L. Co-applicant with monthly income of Rs. 30K, increases eligibility by Rs. 18L. Loan eligibility now is Rs. 42L
Credit History
- Credit cards and past loan repayment history, present credit score as per bureau and default flags if any; all account in determining Loan amount eligibility. Its important to have a score above 730 for easy processing of loan application.
- New to credit or individuals with no score gets loans basis their current financial portfolio.
Work Experience
- Minimum 2 years of experience in case of salaried and 3 years of business continuity for Self Employed applicants.
Property Value
- One of most important factors is the property value. Applicant will not get a loan amount more than the property value.
Nationality
- For NRIs, the Home Loan eligibility accounts for few more factors.