Home Loan Eligibility in India

Banks have certain eligibility requirements that applicants must meet in order to get approval on their home loan applications. By doing so, the borrower assures that he will be able to repay the loan and there are very less chances of him defaulting on the loan. However, If he fails in meeting the eligibility requirements, the bank can reject their home loan application, which will have a negative impact on the user’s overall credit record. The home loan eligibility criteria is set by taking numerous factors into consideration like the age and salary of the applicant along with his Credit Score and other factors.

Eligibility Criteria

Various banks may have a varied set of qualifying criteria according to their needs. However, the qualifying requirements can remain the same among various banks in the country. In order to obtain a home loan from a bank, you have to fulfill the bank’s eligibility criteria. The standard eligibility criteria that remains the same across all the major banks in India is shown in the table below:

Age Restrictions for Salaried IndividualsFrom 23 to 62 years of age
Age Restriction for Self-EmployedFrom 25 to 70 years of age
CIBIL scoreAbove 750
Work Experience (Salaried Individuals)Minimum of three years of Work Experience
Continuity of Business OperationsMinimum of five years of Stable Business
Minimum SalaryINR 25,000
Nationality Indian National

The table above shows the standard eligibility conditions of all the major banks in the country. Your CIBIL score plays an important part in obtaining approval on your home loan application. Moreover, a salaried individual can apply for a maximum home loan of INR 3.5 Crore whereas a Self-employed individual can apply for a maximum home loan worth INR 5 Crore.

Calculation of Home Loan Eligibility

When the lender or bank receives all of your information, it uses specific ratios to determine your eligibility. The three most significant ratios are as follows: 

Fixed Income-to-Obligation Ratio

In this case, the lender considers all of your previous loans and the amount you owe on them, as well as the home loan you’ve applied for. 

Investment to Income Ratio 

The ratio shows the bank how much of your income you should set aside for loan repayment, assuming you require half of your income to cover your monthly expenses.

Loan to Cost Ratio

This ratio demonstrates how much of the property is funded by the lender and how much by you. It’s a method of determining how much equity you have in your property.

Measures to Improve your Home Loan Eligibility

If you want to increase your chances of securing a house loan, here are some things you can do: 

  • Make a working family member, such as your spouse, a loan co-applicant. 
  • Check with your lender to see if you can set up a structured repayment plan. 
  • Make certain that you have a consistent source of income as well as regular savings and investments. 
  • Give details on your regular alternative sources of income, such as rental income from another property, revenue from a firm other than your current work, and so forth. 
  • Keep track of your variable compensation components including bonuses, commissions, and overtime. 
  • Understand your credit score and take immediate action to improve or correct any faults. 
  • Pay off any unpaid loans and short-term obligations.

These are a few steps you may take to improve your home loan eligibility and hence your chances of having your loan application approval. Moreover, if you are applying for a home loan with a low CIBIL score. Then it is advisable to first follow the steps on how to improve CIBIL score and then apply for any kind of loan in order to avoid rejection.