Home loan borrowers have to fulfil certain requirements to qualify for a housing loan, which assures lending banks and financial institutions of their loan repaying ability within the stipulated tenor. Failure to meet these criteria may lead to rejection of loan application, which can adversely affect your credit profile. A home loan eligibility calculator helps borrowers understand their eligibility for a home loan.
What Is a Home Loan Eligibility Calculator?
Banks and financial institutions consider several factors when determining loan eligibility such as applicant’s income, tenor, existing debts, payable EMI, etc. Aspiring home buyers can use these details to check their eligibility online with a home loan eligibility calculator. Consequently, they can make informed financial decisions and enjoy a streamlined loan process. The calculator is also an excellent tool to compute loan details without the complexity of manual calculations.
How to Check Home Loan Eligibility
One can check loan eligibility criteria on the official website of lenders. Most major requirements remaining the same, certain eligibility criteria may differ with each lending institution. Based on these parameters, lenders can assess an applicant’s creditworthiness and repayment history.
Another option to establish loan eligibility is by using an online home loan eligibility calculator. It functions on a mathematical formula to evaluate the eligible loan amount that is within your means.
How to Use a Home Loan Eligibility Calculator
Most lenders offer free access to home loan eligibility calculators on their websites for user convenience. One can easily use them by following the steps given below:
1: Enter your date of birth and city of residence in the respective fields
2: Fill in your net monthly income, excluding LTA and medical allowances
3: Input existing credit liabilities per month, if any
4: Select repayment tenor for which you seek the loan
5: Enter the current home loan rate of interest offered by the lender
6: Fill in the loan amount you want to borrow
7: Click on the ‘Calculate Eligibility’ option.
The displayed result will include the loan amount you are eligible to borrow and the payable EMIs.
Factors That Affect Home Loan Eligibility
Some of the key factors that impact an applicant’s home loan eligibility are mentioned below:
Credit Score
Loan applicants with good credit history and CIBIL score above 750 have better loan eligibility. As a result, they can secure lower interest rates with comfortable terms. However, if you have a poor credit score, you can still improve it with smarter money management and thereafter, apply for a housing loan.
Applicant’s Age
Individuals between the ages of 18 and 70 years are considered eligible for availing home loans. Even so, younger loan applicants with longer career paths have brighter chances of securing home loans as compared to older borrowers, who may have limited work years and income, thereby seeing a dip in eligibility.
Income and Employment
Borrowers in the higher income range can expect favourable eligibility as they pose lower credit risks for lenders. Salaried employees can obtain competitive rates due to regular and stable salaries; especially if they work with central/state governments, PSUs, reputed corporates and multinational companies. Most lenders prefer employment period for a minimum of two years to consider loan eligibility. While in the case of self-employed applicants, they should show consistent earnings and a business venture of at least three years to be eligible for a home loan.
Repayment Capacity
Lenders sanction home loans to applicants whose total credit obligation, including that of the proposed home loan, does not exceed 50% of their net income. To increase loan eligibility, one can choose a longer tenor that will reduce the EMIs making repayments easier.
Market Value of Property
Lenders run several checks on the property in question; examining its physical condition, building specifications and market value to determine the appropriate loan principal. As per RBI guidelines, the maximum amount lenders can extend on a housing loan cannot exceed 90% of the property’s value. Borrowers need to pay the balance sum as down payment. A bigger down payment decreases the principal amount and loan-to-value ratio raising loan eligibility.
Ways to Improve Home Loan Eligibility
If your home loan eligibility is not satisfactory, there are several ways in which one can enhance it as stated below:
Good CIBIL Score
High credit scores above 750 enhance loan eligibility garnering better interest rates. So if you seek to improve your credit score, you should maintain the credit utilisation ratio within 30% and show responsible credit behaviour like repaying credit card dues and loan EMIs on time. Those with poor or nil credit scores can raise them through secured credit cards.
Joint Home Loans
Lenders could reject loan applications due to various reasons such as inadequate income, low credit score or high debt-to-income ratio. If you cannot meet the eligibility requirements for a home loan, consider adding a co-applicant, who must be an earning family member with good credit record. This will not only increase loan eligibility, but also fetch you a higher loan principal. Further, if the co-applicant or primary loan applicant is a woman, one can secure loans at concessional interest rates.
Step-up Loans
Under this facility, lenders offer loans at lower EMIs in the initial years, which gradually increases as you repay the loan. Step-up loans are especially favoured for young borrowers, who can pay higher EMIs, as they progress in their career with bigger earnings. But the interest outgo, in this case, is more than fixed interest loans.
Mortgage Guarantee
India Mortgage Guarantee Corporation (IMGC) collaborates with lenders to help individuals having low eligibility get home loans. Mortgage guarantee reduces the credit risk for lending companies and offers relaxed eligibility criteria. Borrowers can obtain 20% – 30% higher loan amounts through such schemes.
Summing Up
With the right eligibility and lender discretion, borrowers can avail of home loans at rates that could better the current home loan interest rate. This also applies to individuals who wish to opt for a home loan balance transfer. In addition to the financial convenience extended to home buyers through housing loans, they can enjoy several other advantages in the form of home loan tax benefits.
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