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Home Loan Eligibility Calculator
With Urban Money Home Loan Eligibility Calculator, you can check the best loan offerings by just entering a few details. The powerful AI backed eligibility calculator factors in various criteria and parameters across all banks and NBFCs to check which loan offers you are eligible for. The process is fairly simple: all you need to do is enter your income, loan amount, and other details and all the best loan offers suited to your preferences will be displayed.
Factors Affecting Home Loan Eligibility
Loan providers determine your eligibility for a home loan based on several aspects. Given below are some of the factors that affect your home loan eligibility.
Employment and Income
One of the crucial aspects that lenders consider for approving a home loan is the applicant’s employment stability. Usually, a salaried home loan applicant must be employed for at least two years to be eligible for a home loan. Whereas for self-employed applicants, the business should be in functioning for at least three years for the applicant to be eligible. Given below is the classification of applicants based on their type of employment:
- Salaried Individuals: Any applicant working in a government department or private organisation can be classified into this group. Most lenders require the applicant to be in continuous employment for at least one year during the time of application.
- Independent Professionals: This group includes individuals who have their own private professional practice like doctors, engineers, lawyers, chartered accountants, freelancers, etc. Such applicants will be required to submit their bank statements and ITR returns while making the application.
- Self-Employed: Applicants who have their own business or derive their income from other sources like property, investments, shares, etc., fall into this category.
Age of the Applicant
Usually, most lenders try to restrict the tenure of the loan to the main applicant’s age of superannuation. This means, younger applicants in their 20s and early 30s can easily avail a loan with an extended tenure of upto 25 years.On the other hand, applicants over the age of 40 might find it difficult to secure an extended tenure.
Having a good credit score is a critical factor in determining your eligibility for a home loan. Almost all lenders consider the applicant’s CIBIL score to scrutinise the credit repayment history and determine eligibility. Most loan providers prefer applicants who have a credit score of over 750. Applicants with a healthy credit history are more likely to get home loans at lower interest rates.
Most banks and NBFCs approve home loans for applicants whose loan EMI obligations, including the current one, are less than 50% of their total income. Any amount exceeding this limit will be viewed as an additional repayment burden, and the applicant will be viewed as a credit risk. Applicants with a lower home loan eligibility can improve it by applying for a longer tenure as it results in lower EMIs.
While determining the loan eligibility and amount, the financial institution makes a site visit to the concerned property to examine the building condition, specifications, and market value. In accordance with guidelines laid down by the RBI, a lender cannot offer a loan amount exceeding 90% of the market value of the property. This means that you will be required to make a down-payment to purchase a property before applying for the loan. Depositing more money for the down-payment will help in reducing the loan amount, and increase the chances of home loan approval.
How to Improve My Home Loan Eligibility?
Given below are some of the ways that you can improve your home loan eligibility and get approved with ease by any lender:
Maintain a Healthy Credit Score
Most home loan providers prefer applicants with a healthy credit score of over 750. Any score above this mark significantly improves your chances of obtaining a home loan on your terms. You can achieve this credit score by exhibiting positive credit behaviour like timely repayment of EMIs and maintaining a low credit utilisation ratio of 30%.
Apply With a Co-Applicant
If your application has been rejected due to low income, poor credit score, or higher income-to-debt ratio, consider applying with a co-applicant and opting for a joint home loan. The co-borrower should be a family member with regular income and healthy credit history exhibiting an adequate repayment capacity. This will improve your chances of home loan approval and might also result in a higher approved amount.
Ask Your Lender About Step-Up Loans
Under Step-Up Loans, the lender approves loans at lower EMI amounts which are gradually increased as you start repaying the loan. Usually meant for young borrowers with lower incomes, the lender increases the EMI amounts as the applicant advances in his professional career and experiences an increase in income. Step-up loans usually have a higher interest outgo than loans with a fixed EMI scheme.
The India Mortgage Guarantee Corporation (IMGC) has partnered with various banks and lenders across the country to help applicants with lower home loan eligibility. Since obtaining a mortgage guarantee significantly lowers the credit risk for the lender, home loan products in partnership with IMGC have a more lenient eligibility criteria. Further, applicants can also get a loan amount upto 30% higher than normal loan products.
How to Improve your CIBIL Score for a Home Loan?
Lenders gauge your CIBIL score to determine your home loan eligibility. If you have a credit score lower than 750, your eligibility can be affected. Given below are some of the ways that you can improve your credit score to be eligible for a home loan:
- Make Timely Payments: Make sure to not miss any existing EMI or credit card payments. Timely EMI payments can help greatly in improving your credit score for home loans.
- Maintain a Low Credit Utilisation Ratio: The easiest way to restrict your credit utilisation ratio is to apply for a credit increase, while also limiting your usage. This helps in exhibiting responsible credit behaviour, and increases the chances of approval.
- Create a Healthy Credit Mix: Having a healthy mix of secured and unsecured lines of credit is one of the easiest ways to improve your credit score. Having too many unsecured lines of credit can have a detrimental effect on your CIBIL score.
- Check Your Credit Report Regularly: Keep a regular check of your credit report to augment and stabilise your credit score. Regularly going through your credit report will reduce the chances of any faulty or wrong information being included.
- Keep All Old Accounts Active: It is not advisable to close or settle any of your previous accounts. If you keep your accounts active, lenders will be able to view your repayment history and how well you have managed your finances in the past.
Documents Required for Different Types of Home Loans
Given below are the list of documents required for different types of home loan applications.
Home Construction Loan
To apply for a home construction loan, the applicants are required to submit
- Income documents and
- KYC documents.
- Ownership proof
- Property plan/layout
- Construction cost estimate
- Non-encumbrance certificate (for a leasehold land)
The type of plot can be classified as a freehold land or as a plot allotted by the development authority.
Home Loan for Improvement of Existing House
Given below are some of the documents that you will have to submit to apply for a home renovation loan:
- Appropriately filled application form.
- Identity proof and residency proof like PAN card, rent agreement, Voter ID or Aadhaar.
- Proof of income like ITR of previous years, last 2 years P&L accounts and bank statement of last 6 months.
- Property documents.
Home Loan for Resale Flat
To apply for a home loan for resale flats, the applicant must submit the below metioned documents:
- Completed and signed application form.
- Passport size photos [ in case of joint home loan, photographs of both applicants will be required].
- Identity proof documents.
- Address proof documents.
- Bank statements.
- Employment proof and salary slips [salaried employees].
- Business address proof [self-employed].
- Previous financial year's ITR.
- Property documents such as sales deed, allotment letter, receipt of paid tax, NOC and non-encumbrance certificates.
- Copy of approved plan.
In addition to basic home loan documents such as income proof documents, address proof documents, employment proves, all you need are:
- Letter of Allotment or copy of buyer's agreement.
- Title deed will be required in the event of resale together with previous documents of the property.
Things to Keep in Mind While Applying for a Home Loan
Here are three major things you should be mindful of when applying for home loans.
- Check your CIBIL Score: It is always recommended that you check your credit score before making a home loan application. If you have a low credit score, it is likely that your application will be rejected which, in turn, can also have a negative effect on your credit report.
- Keep an Eye Out for Errors: In certain situations there may be errors in your credit report, like incorrect name or address. In such cases, you should know that the relevant credit bureau cannot make changes to your credit report. You will be required to raise a dispute with the credit bureau, who in turn will take up the issue with the financial institution to verify the dispute. If the dispute is correct, the bank will instruct the bureau to make the changes. The whole rectification process takes about 30 days to be completed.
- Avoid Multiple Applications: It is always advised that you should not make multiple loan applications with different providers at the same time. Not only does this negatively impact your credit score, it also forms a negative impression about you to the loan providers. This might also lead to rejection of your home loan applications.
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From refinancing to reducing your interest, we have the answers right here.
Can I get a home loan with a low credit score?
Yes, it is possible to get a home loan even with a low credit score. However, it is important to know that since most lenders will view you as a credit risk, you may be granted a higher interest rate than usual.
Can I get a home loan for an under construction property?
Yes, you can obtain a home loan for an under construction property. However, the loan amount will be disbursed to your account in instalments in accordance with the lender’s assessment.
Who is eligible for a joint home loan?
A joint home loan eligibility mainly depends on the relationship of the applicants. The co-borrower should be a direct relative in order to be eligible for this scheme.
Are there any tax-benefits for obtaining a home loan?
Yes, you can avail tax benefits with respect to home loan EMI payments in accordance with Section 80C and Section 24 of the Income Tax Act.
What is the market value of a property?
The market value of the property can be defined as the price agreed by both the buyer and seller for transactional purposes.
What is meant by ‘own contribution’?
According to the regulation laid down by RBI, lenders cannot approve a home loan exceeding 90% of the market value of the property. This is why most loan providers require the applicant to deposit 10% to 20% of the market value as down payment for the property. This initial deposit made by the applicant is known as down-payment.
Is it possible to get a top-up loan over an existing home loan?
Yes, it is possible to get a top-up loan over your already existing home loan. However you will be required to make regular EMI payments in order to be eligible for this scheme.
What is the loan disbursement process in case of an under-construction property?
In case of a home loan for an under-construction property, the loan amount is disbursed in instalments according to the assessments of the lender. Usually, the loan amount is disbursed on the basis of the progress of construction of the property.