Know About the Factors that Affecting Home Loan Eligibility

Know About the Factors that Affecting Home Loan Eligibility

Firstly Know How to Calculate your Home Loan Eligibility 

Buying a house is a dream come true for many. However, it is also one of the most significant investments one makes in a lifetime. As a rule, a prospective homebuyer can get upto a maximum of 90% of the property value (depending on their eligibility) through a home loan and pay the remaining amount as a down payment. Subsequently, a lending institution will only approve a loan if they are assured of the applicant’s income and repayment capacity. Consequently, they ensure that the home loan EMI does not exceed 40-50% of the applicant’s household income minus their current financial obligations.

For instance, if an individual’s income is Rs. 1,30,000 and they pay an EMI of Rs. 30,000 towards another loan; ideally, their home loan EMI should not be more than Rs. 40,000-50,000. 

A housing loan eligibility calculator is an online tool that calculates an estimate of the home loan one may get. It calculates EMIs based on multiple factors, including the applicant’s income, net financial obligations, interest rate, etc. Read on to learn how to calculate home loan eligibility and how an online calculator helps.

Factors Affecting Home Loan Eligibility

When applying for a home loan, it is essential to consider the lending institution’s eligibility criteria. They may vary from one lending institution to another based on the following parameters:

Age: The applicants must be adult Indian citizens in their prime earning years. They should not be at the beginning or end of their career during the loan term. For instance, they should not cross their retirement age by the loan term-end.

Income: Since lending institutions want to ensure timely payment, they have minimum requirements for the applicant’s net monthly income. It should be enough to accommodate the home loan’s monthly EMIs conveniently.

Credit Score: Generally, lending institutions require a credit score of 700 or above for a home loan. . If an individual’s credit score is high, they may be eligible for a higher loan amount at a lower housing loan interest rate.

Financial Obligations: A high income would be useless for eligibility if the applicant already spends most of it on other financial obligations. For instance, if a person earns Rs. 1,50,000 a month but spends Rs. 1,00,000 for other EMIs and bills each month; the lender may not consider them creditworthy borrowers. Ideally, the applicant’s DTI ratio should not be more than 40-50% of their income.

Down Payment: lending institutions fund 70-90% of the property’s total cost, and the borrower pays the remaining amount as a down payment. Lending institutions consider the applicant’s LTV ratio while determining their home loan eligibility.

Property’s Age, Location, and Condition:  Home loan lending institutions assess the home’s value before approving a loan. If it is too old, located in a faraway place, or has technical flaws or legal issues, the lending institution may decide to reject the loan.

Steps to Check Home Loan Eligibility

One may check home loan eligibility online by visiting the preferred lending institution’s website and using their online housing loan eligibility calculator. It gives personalized quotes for each applicant based on the information they enter. The required details include the applicant’s income, existing obligations, interest rate, property value, EMIs, etc. One may also use this tool to compare loan offers from different lending institutions and make a data-based decision regarding a home loan.

Benefits of Using a Home Loan Eligibility Calculator

Some benefits of using an online calculator include the following:

  • Loan quotes from the comfort and privacy of home
  • No need to visit the lender’s office to know how much loan one may get
  • Fast results within seconds
  • An accurate estimate that helps plan finances for the home purchase
  • No hard enquiry to calculate the loan amount
  • Easy and convenient to use anytime, anywhere 

Tips to Improve Home Loan Eligibility

After getting an estimate of the eligible loan amount, if the applicant is not satisfied with it, one may consider adding their parents or earning spouse as a co-applicant. Applying for a joint loan increases income and makes a person eligible to borrow more. Besides that, the lending institution gets assurance that if the primary borrower fails to repay the loan, the co-applicant is there to take responsibility. 

Another tip is to extend the loan tenure, which will reduce the EMI amount. As a result, the repayment will become easier, and eligibility may increase. However, one may end up paying a higher interest outgo with longer loan tenure. Finally, the applicants must check if they forget to mention some income sources, like rent, investment returns, bonuses, etc. Showing higher income will ultimately increase home loan eligibility.

Use a housing loan eligibility calculator to calculate home loan eligibility. Use the tips above to increase eligibility and get a higher loan to purchase that dream house.


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