Know about the Finance and Investments Terms

Property prices in metros have shot through the roof. The recent demonetisation move, designed to curb black money has hit the real estate industry hard. That’s because this industry was plagued by black money transactions. Now, it’s expected that home buyers will opt to avail Home Loans to fund their home purchase.

Savings alone won’t help you buy a home. You need to take a Home Loan. But the question is “Am I  eligible for a Home Loan”? If yes, how much loan can I get? Can I get full financing?

Before banks process your Home Loan application, they do a Housing Loan eligibility check. If you meet the Home Loan eligibility criteria set down by the bank, your Home Loan application will be processed. 

Home Loan Eligibility Factors

Here are some vital factors that determine your Home Loan eligibility

• Monthly Income

The quantum of your monthly income determines your maximum loan eligibility. Normally banks approve 60 times your monthly income as a Home Loan. Higher the monthly income, higher will be your loan eligibility.

Available Income

This is the quantum of income available after servicing your other loan commitments. Your Home Loan eligibility will be calculated after making these deductions from your income.

• Age

You can apply for a Home Loan, only if you are over 21 years. The maximum age limit is 58-65 years, depending on the nature of your employment. If you’re nearing the retirement age, your eligibility will decrease, since you won’t have a steady source of income to service the loan.

• Credit History

To avail any type of loan, you need to have a good credit history. A high credit score vastly improves your Housing Loan eligibility. You can also be privy to a lower interest rate on Home Loans if you have a 750+ credit score.

• Property Attributes

Your Home Loan eligibility is not only based on your personal factors, but also on the property against which the Home Loan is taken. Banks look for a clear title, free of encumbrances and whether project approvals are in place and builder profile to determine Housing Loan eligibility.

• Co-applicant Profile

If you want to improve your Housing Loan eligibility, bring a co-borrower. If the co-applicant is also an earning member, you gain higher loan eligibility. A good credit profile between the two of you helps you get a loan at attractive terms.

How Much Home Loan Can You Borrow?

If you’re a first time home buyer and availing a Home Loan for the very first time, you’ll be surprised to note that banks don’t offer 100% financing. In most cases, banks offer Housing Loan only to the extent of 85% of the property value.

For example, if a property costs 50 lakhs and you apply for a House Loan, the maximum loan amount you’re eligible for is Rs. 42.5 lakhs (85% of 50 lakhs). Banks can reduce this percentage if you don't meet their eligibility criteria. 

You can calculate your eligibility using a Home Loan eligibility calculator which factors your annual income, your occupation and the city you live in to know your Home Loan eligibility. 

Each bank has its own set of eligibility criteria for Housing Loan. It is best to check the eligibility criteria and apply. A rejection of a House Loan application can be a blot on your credit history and affect your eligibility for future credit for other purchases and requirements.