How much home loan can I get?

With the ever rising rates of real estate most of us have to rely on home loans to purchase our dream home. We can become home owners by approaching banks, housing finance companies and non-banking finance companies who can offer us the funds we need to buy the house of our choice. But lenders consider a lot of things before they actually approve a home loan. They judge your credit scores, repayment capacity, previous credit behaviour, other loans you are paying and your annual remuneration before they sanction your loan amount. So if you are a salaried person wondering how much home loan can I get on my salary, this article is for you.

Home loan for salaried people

The lender considers your net salary: The most important component for any lender is the salary earned by the borrower. Based on your net or take-home monthly remuneration, the lender can predict the Equated Monthly Instalments or EMIs you can pay. Let's look at it with an example

Mr. Verma is looking to buy a 1BHK flat. He earns a monthly salary of ?60,000. After the mandatory deductions, he receives ?55,000 in hand which is his net salary. Now let's say he approaches India Bulls Housing Limited for a home loan. At a monthly salary of ?50,000 and above, Mr. Verma could be eligible for a home loan for a property whose minimum value is ?4,000,000 if he lives in and purchases a property in a city like Mumbai or Delhi. However, if he resides in a smaller city, let's say Pune, Hyderabad or Bangalore, he would be eligible for a home loan for a property with a minimum value of ?3,000,000. As is evident from this, IBHL will base his loan approval based on the city he wishes to purchase the property in, the value of the property and his monthly income.

The lender considers your repayment capacity: While your net salary answers the question how much home loan can I get, it is not the only parameter. Before you approach a lender you must calculate your monthly expenses, including your utility bills, credit card debts and other loans if any, in case you are paying other EMIs. This will help you understand the income you have left. Now, you must take the remaining amount and use a home loan EMI calculator, freely available on all lender websites to calculate the EMI you can afford by entering the principal loan amount you intend to borrow, an acceptable loan tenure and interest rate. You will arrive at the payable EMI and get an idea as to whether you can or cannot afford it.

The lender considers your credit score: A home loan is a loan that lasts up to 20 years, sometime more. It is a high value loan so the lender needs assurance that you will not default on EMI payments. To this effect, they will evaluate your credit scores. Credit scores can help your lender understand your credit repayment behaviour. A high credit score assures the lender that you are a responsible borrower. The lender may even increase your loan sanction amount based on your credit scores. Ideally, you would require a credit score of 750 and above for your loan to be considered. You can check your credit scores online before approaching a lender.

The lender will consider your age: If you take a home loan in your mid or late 40's, lenders will be concerned that you are drawing closer to retirement. So while you may have a high salary, your loan may extend to your retirement tenure. As such the question is not how much home loan can I get on my salary but how soon should I take a loan. Keep this in mind and avoid delaying taking a home loan