Building a home incurs significant costs, and for banks to be able to lend to you the required amount for taking house loans, they have to be convinced that you have the capacity to repay what you’ve borrowed with interest within the stipulated time period. A measure of this ability is known as Home Loan Eligibility.
People from different levels of income are eligible for different amounts of loans based on their salaries and expenses. It is calculated on the basis of multiple factors including monthly income, fixed monthly obligation, current age, retirement age etc. Basically your home loan eligibility can also be considered an indicator of your home loan affordability.
You can get a rough idea of your Home Loan eligibility through a home loan eligibility calculator that is available online. By entering the required details, you can find out the amount of loan you are eligible for, the interest that will have to be paid, and the tenure of loan.
These calculators can also be used as a housing loan EMI calculator, as most Home Loan Eligibility Calculators today will tell you the amount of payable EMI as well. Your home loan eligibility can also be helped by having a good CIBIL score. A CIBIL score is a three-digit numeric summary of your credit history derived using the credit history found in the CIR. A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time.
Home Loan Eligibility Criteria:
Different banks have different criteria for deciding an individual’s eligibility for a home loan of a certain value. Hence there is no standard calculator that can give you an all-round eligibility, across all banks or the economy. However, there are certain common factors that decide your eligibility that are common all across. These include:
- Deposit amount
- Credit history- This is where your CIBIL score that was mentioned previously comes into play. The more regular you were, in paying off mortgage of previous loans, the better your loan history is going to look and hence the better your chances will get in getting your new loan approved.
- Income- The amount of loan you can get from a bank is directly proportional to the amount of monthly or annual income you have, as this directly affects your loan affordability and your ability to repay said amount.
- Financial stability- The type of employment also plays a factor here. A self-employed individual who would have different earnings in different months would find it more difficult to get a loan. However, this again is dependent on the amount of average monthly income that the borrower earns.
- Debts- The amount of debts that one has racked up and is pending to be paid off will have a great impact on his/her home loan eligibility. The more the amount of pending debt, the lower the eligibility for another loan.
- Value of your home (if any)- Every loan requires the borrower to mortgage an asset as collateral, in case he/she is not able to pay back the loan amount with interest. An already existing home can act as a great collateral for a home loan. Hence, the higher the value of said home, the better your eligibility for a home loan.
Getting a house loan requires you to convince your bank that you can afford to repay the amount with interest. If the said parameters work in your favour, getting a home loan is just a matter of paperwork and approval.