Understand Home Loan Eligibility

Today, although many lenders in India, including banks and NBFCs (non-banking financial companies), offer home loans at affordable interest rates, getting your loan sanctioned greatly hinges on meeting the lender-specific home loan criteria. All financial organisations have certain eligibility requirements for home loans, and they vary from one lender to another. 

In this guide, we look at some general home loan eligibility requirements, the documents required for a home loan, and tips to increase your home loan eligibility.

 

• Age

All lenders have a minimum and maximum age limit for home loans. You must be at least 18 years and a maximum of 70 years at the time of applying for the loan. 

 

• Income

One of the most critical factors that lenders consider while calculating housing loan eligibility is the applicant's income level, as it reflects their repayment capacity. You must have a stable income source; the higher your income, the better your chances of getting the loan approved without any hassles. 

If you are applying for a joint home loan, i.e., with a co-applicant, the lender will consider the income level of both applicants, and you may become eligible to get a higher loan amount approved. 

 

• Property ownership

This is perhaps the most critical home loan eligibility. As a borrower, you must be the legal owner of the property, i.e., the property you wish to buy must be registered in your name. In case of a joint home loan, you and the co-applicant must be co-owners of the property. 

 

• Property value

Some lenders consider the property value while assessing the home loan application. The value of the property that you want to buy should meet the lender’s specified minimum value requirement. 

 

• Credit score

A credit score is basically a three-digit number, ranging from 300 to 900, which reflects your creditworthiness, and lenders consider this score as one of the critical factors to determine your loan home loan eligibility.  The higher your credit score, closer to 900, the better your chances of getting a higher loan amount. Also, it is paramount to consider that certain lenders in India offer home loans to applicants with a credit score of (-1). 

 

Documents required for a home loan.

While knowing and meeting the lender’s eligibility criteria is critical to getting a home loan approved, it is equally important to know and comply with the documentation process. All lenders require you to submit certain documents, which can vary from one lender to another and based on whether you are a salaried or self-employed individual. 

For Salaried Individuals

Identity Proof (you can submit any of the following documents)

• Pan card (mandatory) 
• Voter ID
• Aadhar card
• Driving license

 

Address Proof (you can submit any of the following documents)

• Valid passport
• Aadhar card
• Voter ID
• Driving license
• Utility bills – water bill, landline or post-paid telephone bill, electricity bills (any one of these)

 

Income Proof

• Salary slips
• From 16 or ITR (Income Returns Proof)
• Bank statement reflecting salary credit.

 

Property-related Documents

• Title deed of the property.
• Proof of no encumbrances on the property.

 

For Self-employed Individuals

Identity Proof (You can submit one of the following documents)

• Passport
• Voter ID
• Aadhaar card
• Driving license

 

Address Proof (you can submit any of the following documents)

• Valid passport
• Aadhar card
• Voter ID.
• Driving license.
• Utility bills – water bill, landline or post-paid telephone bill, electricity bills (any one of these)

 

Income Proof

• Proof of IT (Income Tax) returns.
• Financial statement of the business – Profit and Loss account, balance sheet duly audited for last three years.
• Income-related documents.

 

Other Documents

• The application form duly signed with a picture.
• A cheque duly signed to pay the processing fee.
• Proof of business existence.

 

Property-related Documents

• Title deed of the property
• Proof of no encumbrances on the property

 

How to boost your home loan eligibility?

While most lenders have simple home loan eligibility criteria, sometimes you may fall short of meeting the requirements. However, all is not lost for you, and you need not give up on your hopes of getting the loan and buying your dream home. Instead, it would be best if you focus on improving your loan eligibility. In that regard, here are a few valuable tips. 

 

• Choose a longer home loan tenure.

The tenure is one of the most critical factors that affects your eligibility as well as the EMI of the loan. Generally, most lenders offer home loans for a maximum period of 30 years, and you can choose the tenure based on your repayment capacity. 

If you choose a longer tenure, your EMI will be lower, which can improve your eligibility. However, you must know that a longer tenure also increases the overall interest payment. 

 

• Be wary of the LTV ratio.

LTV (Loan-to-Value) Ratio is basically the percentage of property’s value that you can borrow as home loan. As per the RBI (Reserve Bank of India), the lenders can approve a maximum of up to 90% of the property’s value home loan. 

But if you want to opt for a lower LTV, i.e., borrow a lower amount, it can significantly improve your home loan eligibility. If you are not sure how much you can afford to borrow, you can use the house loan EMI calculator to know the exact EMI payable for the amount you borrow and make an informed decision accordingly. 

 

• Maintain a stable employment record.

From a lender’s point of view, a stable employment record means you have the financial means to repay the loan on time, which could improve your chances of getting the loan sanctioned. 

 

Conclusion

Meeting home loan eligibility is a prerequisite to making your dream of owning a home come true without feeling any financial burden. Make sure that you know the lender-specific eligibility and prepare yourself accordingly beforehand so that you can get the loan approved without any hassles or delays.