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How do I Know If I Qualify for a Home Loan?

Highlights

  • Looking for a home loan but don’t know whether you will qualify for the same?
  • Read this post that tells you how lenders will assess your home loan eligibility

It feels great when the lender approves your home loan application and lets you purchase your dream home. Such reactions are natural as you dream of having a home much before you buy it. The approval depends on your income and the authenticity of property transactions. If you need sufficient income to pay your EMI, the house should be genuine too for meeting the home loan eligibility. So, if you want a hassle-free approval, you should know everything about the home loan eligibility beforehand.

In case you apply without having the required eligibility, you could either face rejection or get less loan from the lender. Either way it will be a loss for you! Let’s read the home loan eligibility points without any further delay.

What Else Do You Require to Qualify for a Home Loan?

Besides good income and authentic property transactions, getting a home loan will depend on less to zero debt obligations and even your profession. You need to tick all the boxes for hassle-free approval. Let’s check each of these below so that you can prepare better.

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How Much Should You Earn to Meet the Home Loan Eligibility?

Well, lenders don’t specify the minimum income for a home loan like they do in the case of other loans. But you must earn enough to pay the proposed home loan EMI. To meet the home loan eligibility, the EMI should not exceed 50% of your net monthly income (NMI). In case it exceeds, the lender can increase the tenure to accommodate the EMI. If the EMI still remains greater than the threshold level as told above, you could face rejection.

That’s why doing some mathematics before will hold the key for you. Let’s use the Home Loan EMI Calculator to know the installment and total interest payable. Enter the loan amount, interest rate and tenure in the calculator to calculate the same.

How Does the Property Value Dictate Home Loan Eligibility?

Irrespective of how high your earnings are, the maximum home loan eligibility can’t exceed the specified value of the property. Loans upto INR 30 lakh, above INR 30-75 lakh and above INR 75 lakh are given upto 90%, 80% and 75% of the property cost. So, if you are looking to buy a property worth INR 50 lakh, you could get a maximum loan of INR 40 lakh. Even if you can pay the EMI for INR 45 lakh loan, you won’t get such an amount from the lender.

Also, checking the home loan disbursal ratio shown above indicates the savings for you to have. The ratio suggests a savings equivalent to 10-25% of the property cost, which you need to pay to the property seller. In case you could not accumulate the required savings, you will need to buy a property costing less.

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How Do Existing Obligations Impact Your Home Loan Eligibility?

Your existing loan or credit card relationship will also impact your home loan eligibility. As we said above, the EMI must not exceed 50% of your NMI. But while calculating the eligibility for a fresh loan, lenders also consider existing obligations. The current and new debt obligation should remain within 50% of your NMI. However, the percentage norm can vary based on the income levels of customers.

What Will Happen If Your Work Period Left is Relatively Short to Service a Home Loan?

Given the expected large home loan quantum, you will need a fairly greater time to pay off in full. You can get the loan for a maximum of 30 years. But the loan tenure can’t exceed the time left in your work life. If you apply at the age of 45, you can get a maximum of 15 years to pay the same, assuming you will retire after attaining 60 years of age.

You can thus use the EMI Calculator as told above and figure out your home loan eligibility for 15 years. The EMI will be relatively higher for a 15-year loan. But if you remain eligible for the same, it could be a blessing in disguise for you! A shorter tenure can help reduce your home loan interest payment substantially compared to when the loan runs longer.

How Does the Profession of Individuals Impact Their Eligibility?

The profession you have impacts your home loan eligibility greatly as that dictates the flow of income. With a regular flow of income, you can get the approval easily compared to someone having irregular earnings. Salaried, by virtue of regular income, gets the loan easily compared to self-employed who depend on how their business fares over periods. So, there can be a degree of uncertainty in their operation, and if that plays out, their home loan eligibility could reduce.

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The Authenticity of Property Transactions

The approval to a home loan will also depend on the authenticity of property transactions. Ensure you are buying the right property free of any legal disputes. The lender sends a team of technical and legal experts to undertake technical and legal verifications of the property, respectively. During a technical verification, the visiting officers check the dimensions of the property and see whether they are in line with the property map. If they are, they will send a technical report to the lender, which will decide your home loan eligibility based on the report.

In case there are deviations, the lender can put a home loan application on hold. Similarly, lawyers will eye on the chain of property owners.  In case they find anything suspicious, they will report it to the lender, which could reject your loan.

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  • Home Loan Interest Rates December 2020
    Axis Bank7.75% - 8.55%
    Bank of Baroda6.85% - 8.25%
    Citibank7.13% - 8.03%
    HDFC6.90% - 7.65%
    ICICI Bank6.90% - 8.05%
    Indiabulls Housing Finance Limited8.99%
    Kotak Bank6.75% - 8.45%
    LIC Housing6.90% - 7.90%
    Piramal Capital & Housing Finance9.65%
    PNB Housing Finance7.50% - 9.20%
    Reliance Home Finance8.75% - 14.00%
    State Bank of India/SBI6.95% - 7.60%
    Tata Capital7.50% - 8.75%