Would I be eligible for a home loan?

Home Loans

Eligibility criteria are very well assessed before sanctioning of home loans. Earning a lot of money doesn't mean that the person is eligible to obtain a loan of any amount. A person would always be keen in knowing – Would I be eligible for a home loan? as he/she has certain plans/objectives in mind for achieving his/her dream home at a specific date. Home Loan eligibility means how much loan amount one can avail for buying a house. Simply because you are earning  ₹ 1 lakh a month, doesn't make you avail a  ₹ 50 lakhs loan. It is always depend on a formula and is calculated based on some mathematical formula and logical parameters.

Factors affecting your Home Loan Eligibility

There are certain factors which evaluate a person's home loan eligibility, described as follows :

Stability of Income

Your income is perhaps an essential factor that ascertains your home loan eligibility. Higher your income, higher are the chances of your ability to pay the bigger liability. However, the banks may deduct LTA, HRAand medical allowances you obtain from the company from your annualized take home salary before determining the amount of loan you are eligible for. In some instances, the bank may even prefer monthly incentives or annual bonuses which you get from the company and that has been stabilized over a period of time. Along with, the bank reviews, the number of dependents you have and take into consideration to ensure that you contribute some portion of the monthly salary to your parents or other dependents like spouse or kids. No matter whatever your income be, the income which you have had filed for the Income Tax Return(ITR) in the last two-three years, would also be taken into account as well.

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Nature of business or profession

Profession comes as the next factor while assessing home loan eligibility of an applicant. Banks consider people who have a stable income. People who are in white collar jobs such as banking, aviation, and government service assure stability as compared to people working in BPO or KPO sector or running their own businesses are not considered appropriately safe as there is no job security and hence, income is not fixed. Also, switching many jobs in the past at a rapid pace, have the chances of decreasing your home loan eligibility considerably.

Age of the loan seeker

 Age of the home loan seeker ascertains the number of earning years left with the individual to repay the loan. A person in his thirties will have atleast 30 years to repay the loan, however, a person in his fifties has only 10 years before his/her retirement. The younger the person is, the higher would be his/her eligibility.

Credit Score

Credit history of the loan applicant is a must. Banks maintain a database of borrowers and assess whether they are the regular payers of EMIs in the past. You can also ensure to check your credit rating on CIBIL website in order to check for any likelihood of mistakes and that may have affected your credit score. If you are a first-time loan applicant, chances of sanctioning of your loan would be higher. And if there happens to be any repayment default in the past, you might not be getting the loan in your first attempt.

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Attributes of the property

Banks always ensure to make a property visit before approving any kind of loan. The banks will check how old the property is, its market value, approvals, encumbrance and completion certificates (in the case of a new property) and whether the property is free from any dispute. Normally, government or nationalized banks don't give their acceptance easily for home loans especially for builder floors or flats. Housing projects or townships by renowned builders get an easy approval.

Your Relation with the Bank 

Some banks assess your relationship with the bank in the past. If you are having a running account for the last few years in the bank you are pursuing the loan from could be an added advantage.

The Company you work in 

Banks classify the companies in A,B and C category. If you are working for  highly renowned companies like Google, Reliance or TCS, chances are higher for you to easily get the home loan from the bank but the banks will offer it at a slightly competitive rate of interest. This means a lot if your loan repayment tenure is long.

Furthermore, the eligibility calculators are the best tool to accurately assess whether you are eligible or not. To compute the eligibility, you have to enter the inputs in the calculator of the bank for which you have applied for a home loan.

Home Loan Eligibility Calculator SBI

Assess your affordability before applying for home loans. By using home loan eligibility calculator SBI, you get to know how much EMI you can manage to pay from your monthly savings. You need to enter the following details in the calculator such as monthly income, tenure, expected interest rate and existing liabilities which will help you in deciding on the loan amount to apply.

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An example to use Home Loan Eligibility Calculator ICICI

To know how the eligibility is assessed, let us understand from a simple example :

Suppose, Shalini earns  ₹ 80,000 per month as a Software professional. After deducting her expenses and commitments, she must be saving some amount. As a thumb rule, banks in India assume that savings can be anywhere from 40%-50% of your in hand income. Let's say, the ratio comes out to be 50%.

So, the banks assess her savings per month would be 50% of ₹ 80,000, which is ₹ 40,000. This amount would be available for repaying any kind of EMIs.
Now banks will calculate reversely and determine how much EMI is required to pay off ₹ 1 lakh loan using the standard interest rate and tenure. Enter these details in the home loan eligibility calculator ICICI i.e. loan amount, interest rate and tenure. Assume that bank takes 30 years tenure and interest rate of 10.5%, the EMI required to pay ₹ 1 lakh loan per month comes to ₹ 915.

Now the banks will analyze how much loan Shalini can afford, if considering ₹ 915 required to be paid against ₹ 1 lakhs loan. So, it would be
₹ 1 lakh *40,000/915 =₹ 43.71 lakhs

So, Shalini's home loan eligibility is ₹ 43.71 lakhs

To sum up, home loan eligibility is the maximum amount of a loan a person can get for buying a home. Now you must be able to answer "Would I be eligible for home loan?" taking into account all the factors discussed above.