Home Loan Eligibility Calculator

Lenders decide if you can get a home loan by looking at your age, credit score, how much money you make each month, and your credit history. Keep reading to find out what top lenders in India consider for home loan eligibility and ways to make it better.

Home Loan Eligibility Criteria

Lenders use several key factors to decide if you can get a home loan. These include your age, credit score, income, job stability, and ability to repay the loan.

What is a Home Loan Eligibility Calculator?

A home loan eligibility calculator is an online tool that helps you figure out how much money you can borrow for a home loan. You just need to enter your age, income, loan duration, interest rate, and any existing debts. Some lenders' calculators might also ask for your location to see if they can offer you a loan there. Just visit your bank's website to find out how much you could potentially borrow for a home loan.

How to Use Home Loan Eligibility Calculator?

Home loan eligibility calculators are simple to use. To get results, users just need to enter their gross monthly income, loan tenure, interest rate, and existing loan EMIs (if any). Some lenders might also ask for additional details like city, date of birth, and employment type.

Key Factors Affecting Home Loan Eligibility

Several things affect whether someone can get a home loan. Knowing these things can help you improve your chances of getting approved. Here are some factors that lenders look at to decide if you can get a home loan:

Home Loan Eligibility based on Salary/Income

Many lenders haven't revealed the exact income needed for home loan applicants. But for those who have, they ask for salaried applicants to have a net monthly income of around Rs 15,000 to Rs 20,000, and for self-employed applicants, they look for a net annual income of at least Rs 1.5 lakh per year. Lenders often have lower income requirements for applicants using affordable housing loan schemes.

Home Loan Eligibility based on Age

To apply for a home loan, you generally need to be at least 18 years old, although some lenders may require you to be 21. The maximum age at loan maturity is usually around 70, although some lenders may allow up to 75. Home loan terms usually last up to 30 years, with many lenders using the age of retirement as the maximum age limit. This means younger applicants have a better chance of getting longer loan tenures.

Home Loan Eligibility based on CIBIL Score or other Credit Scores

Banks and HFCs generally prefer approving home loan applications from individuals with credit scores of 750 and above. This is because those with high credit scores typically manage their finances well, reducing the risk of defaulting on the loan. Lower default risks mean lenders can offer lower interest rates to these applicants. It's worth noting that the minimum credit score requirement for a home loan can vary among lenders. Some lenders even provide home loans to individuals with no credit history.

Home Loan Eligibility based on Employment

Home loans are available to both salaried and self-employed individuals, but salaried employees often have an easier time getting approved due to their stable income. Among salaried applicants, those working for Central/State Governments, PSUs, reputable companies, and MNCs have better chances of getting approved. Some lenders even offer lower interest rates to these applicants.

For self-employed individuals, professionals like doctors, architects, and chartered accountants have better chances of getting approved. However, applicants whose occupation or employer isn't on the lender's approved list might have their applications rejected.

Many lenders require salaried individuals to have at least 2 years of work experience, while self-employed individuals need their businesses to have been running for at least 3 years. Therefore, if you're planning to apply for a home loan in the future, try to avoid changing jobs if possible.

Home Loan Eligibility based on Repayment Capacity

Banks and HFCs typically approve home loans for applicants whose total EMI obligations, including the proposed home loan, don't exceed 50% of their total income. Choosing a longer home loan tenure can reduce the EMI, making it easier for those with lower housing loan eligibility to qualify.

Lenders use metrics like EMI/NMI ratio or Fixed Obligation to Income Ratio (FOIR) to assess applicants' loan repayment capacity. This ratio represents the portion of an applicant's monthly income used to cover their loan EMIs, including the proposed home loan EMI. Generally, lenders prefer an EMI/NMI ratio of less than 50% to 55%. Exceeding this limit reduces the chances of loan approval.

Home Loan Eligibility based on Property Value and LTV Ratio

The property value and Loan-to-Value (LTV) ratio are two key factors that lenders use to determine how much loan an applicant can get. The LTV ratio represents the percentage of the property's value that the lender is willing to finance through the home loan. The Reserve Bank of India (RBI) has set limits on these ratios based on the property value, as shown below:

How is Home Loan Eligibility Calculated?

An applicant's eligibility for a home loan is mainly calculated based on their income, ability to repay the loan, and the value and characteristics of the property they're pledging. Lenders also consider other factors such as credit score, age, occupation, job or business stability, and the profile of the employer when assessing eligibility for a home loan.

Tips to Increase Home Loan Eligibility

Some of the ways to improve your home loan eligibility are:

• Maintain a high credit score: Having a high credit score, ideally 750 or above, increases your likelihood of getting approved for a loan and securing better loan rates. Engaging in responsible credit practices, such as paying credit card bills and loan EMIs on time, and refraining from making numerous loan applications within a short timeframe, can help raise your credit score.
• Limit your EMIs within 50-55% of your net monthly income: Applicants with total EMI obligations, including the proposed home loan, that make up 50-55% of their net monthly income have better chances of getting approved for home loans. For those exceeding this limit, opting for longer tenures on their home loans can lower their monthly EMIs. This may help keep their total EMIs within the recommended limit, improving their eligibility for a housing loan.
• Check for interest-only home loan repayment options: Many lenders offer special home loan schemes like Step Up Home Loan, Interest Only Home Loan, or Flexipay Home Loan. With these schemes, borrowers only pay the interest portion of the loan during the initial years. Later on, they switch to regular EMI payments that cover both interest and principal until the loan is paid off. These schemes are great for people who are currently renting but plan to buy a property under construction. They're also beneficial for those who expect their income to increase in the future and want to delay paying higher EMIs until then. However, it's important to note that while these schemes increase your loan affordability, they also lead to a higher overall repayment amount in the long run.
• Pay higher down payments: Lenders finance up to 90% of the property's value, depending on its appraisal. The borrower must cover the remaining portion of the property's value through their own funds, either as a down payment or margin contribution. Making a larger down payment or margin contribution reduces the risk for the lender, increasing the likelihood of home loan approval. Opting for a lower Loan-to-Value (LTV) ratio can improve your chances of loan approval.
• Avail Mortgage Guarantee-backed Home Loans: The India Mortgage Guarantee Corporation (IMGC) collaborates with lenders to provide mortgage guarantee-backed home loans to individuals who may have lower eligibility for a home loan. In this partnership, IMGC offers partial credit risk coverage to home loan lenders through guarantees in the event of loan default. This helps reduce the credit risk for banks and housing finance companies, enabling them to relax loan eligibility criteria and offer higher loan amounts. They may do this by extending longer tenures for applicants nearing retirement age or by providing higher Loan-to-Value (LTV) ratios.
• Add a co-applicant: When lenders assess a home loan application, they consider the income and repayment capability of both the main applicant and any co-applicants. So, adding a family member who earns money and has a good credit history can lower the lending risk for the lender, making it more likely for you to get approved for the loan. Having a co-applicant also means you can borrow more money or choose a shorter loan term. Additionally, having a female primary applicant or co-applicant might even lead to lower interest rates on the loan. However, it's important to remember that if you or the co-applicant(s) delay or miss EMI payments, it will hurt both of your credit scores.