Buying a home is an important investment that requires proper planning and financing. One of the most crucial aspects of financing a home purchase is determining your eligibility for a Home Loan. Housing loan eligibility is calculated based on several factors, including your monthly income, fixed monthly obligations, current age, and retirement age. Your Home Loan eligibility can also indicate your Home Loan affordability. This article will provide essential information on how to check your Home Loan eligibility based on your salary in 2023.
Types of Home Loans
- Home improvement loan: A Home improvement loan is taken for renovating, repairing or extending the existing home.
- Land loan: A Land loan is taken for buying a plot of land on which you plan to construct your home.
- Home Loan overdraft: A Home Loan overdraft is a type of loan where the borrower can withdraw money from a savings or current account linked to the Home Loan account.
- Balance transfer: The balance transfer is a type of loan where the borrower transfers the outstanding loan amount to another lender offering a lower interest rate or better terms.
- Step-up Home Loans: Step-up Home Loans are designed for young professionals with a low income who have just started their careers. The loan amount and EMI increases over time as the borrower’s income increases.
Home Loan interest rates
Home Loan interest rates depend on several factors, including loan amount, loan tenure, and the borrower’s credit score. Generally, the Home Loan interest rate ranges from 8.95% to 9.70% per annum. The interest rate is usually fixed for the entire loan tenure.
Documents required for a Home Loan
To apply for a Home Loan, you will need to submit the following documents:
- Application form with photograph duly signed
- Identity, residence and age proof
- Last six months’ bank statements
- Last three months’ salary slips
- Form 16/ Income Tax Returns
Housing loan eligibility criteria based on salary
The housing loan eligibility criteria depend on several factors, such as monthly income, fixed monthly obligation, current age, retirement age, etc. Most lenders have an online Home Loan eligibility calculator that helps you determine the loan amount you are eligible for based on your income.
Monthly Income:
Your monthly income plays a critical role in determining your Home Loan eligibility. Generally, lenders prefer that your monthly income is sufficient to pay the EMIs without defaulting. However, the minimum salary requirement will differ depending on the customer’s profile. Some banks and financial institutions require a minimum monthly income of Rs 25,000 (depending on where the applicant lives). However, others may require a minimum monthly income which is higher or lower.
Fixed Monthly Obligations:
Fixed monthly obligations refer to the money you must pay towards existing loans or credit card debt each month. Lenders will consider your fixed monthly obligations while calculating your Home Loan eligibility. If you have too many fixed monthly obligations, it may reduce your eligibility.
Current Age:
Your age plays a significant role in determining your Home Loan eligibility. The younger you are, the higher your eligibility. This is because lenders prefer lending to individuals with a longer repayment period.
Retirement Age:
Your retirement age is an important factor that lenders consider when calculating your Home Loan eligibility. If you are close to retirement age, your eligibility may be lower, as the lender will consider your repayment capacity after retirement. Therefore, consider taking a loan for a shorter tenure if you are nearing retirement age.
Factors Affecting Home Loan Eligibility:
Income: Banks and financial institutions have a minimum income requirement, and your eligibility will be impacted if your income is below that threshold. A higher income translates to higher eligibility, and you can also consider adding a co-applicant with a higher income to increase your eligibility.
Credit Score: A good credit score is crucial for Home Loan eligibility. A higher credit score indicates that you have a good credit history and are less risky to lend to. Conversely, a low credit score can hurt your eligibility or increase interest rates.
Employment Stability: Your employment stability is another factor that affects your Home Loan eligibility. Banks and financial institutions prefer applicants with stable jobs and a regular income. Therefore, they generally look for at least two years of work experience with their current employer.
Existing Liabilities: Your existing liabilities, like credit card bills, personal loans, car loans, etc., impact your Home Loan eligibility. Banks and financial institutions consider your existing liabilities while evaluating your eligibility.
Age: Age is also a factor that affects Home Loan eligibility. Banks and financial institutions prefer applicants who are in the age group of 21-58 years. This is because younger applicants have a longer repayment period, and banks and financial institutions can lend them higher amounts. However, older applicants may need help getting a higher loan due to a shorter repayment period.
Property Value: The value of the property you purchase or construct also affects your eligibility. Banks and financial institutions finance a percentage of the property value, and your eligibility will be higher if the property value is higher. You can also consider adding a co-applicant with a higher income or collateral to increase your eligibility.
In conclusion, your Home Loan eligibility is calculated based on various factors such as your income, age, credit score, and repayment capacity. Before going for a Home Loan, check your eligibility to avoid rejection and a negative impact on your credit score. You can use online Home Loan eligibility calculators to estimate your eligibility and plan your finances accordingly. By considering these factors and submitting the required documents, you can apply for a Home Loan and fulfil your dream of having your own home.
