Home loans are among the most popular financial tools in the market these days as they help you fund your dream house without depleting your savings. Banks and financial institutions offer housing loans at affordable interest rates for up to 30 years, which makes it easier for you to pay off your monthly instalments using a home loan EMI calculator. 

However, not everyone may qualify for such a loan. All lenders have a few parameters to determine an individual’s home loan eligibility. To get the loan sanctioned, borrowers must fulfil the predetermined eligibility criteria. Read on to know all about home loan eligibility and how you can improve your chances of getting a loan.

What Is Home Loan Eligibility?

Home loan eligibility refers to a set of criteria based on which lenders assess the borrower’s creditworthiness. It is determined based on several factors, such as the borrower’s age, monthly income, credit score, financial obligations and liabilities etc.

How to Check Home Loan Eligibility?

Borrowers can check whether they are eligible for a housing loan or not using a home loan eligibility calculator. This is an online tool designed to help individuals assess their worthiness based on a few factors. All you must do is access the online calculator and enter the following details in the relevant fields –

• City name
• Date of birth
• Monthly income
• Monthly EMI/obligations

The home loan eligibility calculator will instantly give you an estimate of the loan amount you are worthy of based on the above parameters. It is a free and reliable tool that provides you with an accurate outcome.

Factors Determining Home Loan Eligibility

Listed below are some of the common factors that lenders consider when determining eligibility criteria for a home loan –

• Age: The borrower must be between 23 years and 62 years of age (salaried) and between 25 years and 70 years (self-employed)
• Nationality: The applicant must be a residing citizen of India
• Monthly Salary: The minimum monthly salary of the borrower must be INR 25,000/-
• Employment Type: The applicant must be a working professional with at least 3 years of experience in an MNC or the private/public sector (salaried) and at least 5 years of experience running a business with a steady flow of income (self-employed)
• Credit Score: The borrower must have a decent credit score, ideally over 750. While you may not have full control over all the factors mentioned above, you can improve your chances of getting the loan approved by working on some of them and boosting your eligibility for a home loan. 

7 Tips to Increase Your Home Loan Eligibility

You can follow the tips below to increase your home loan eligibility. 

Opt for a Longer Home Loan Tenor

Opting for a longer home loan tenor can increase your home loan eligibility since the monthly EMI will be lower and the chances of repaying the amount on time will be higher. As a result, the lender will see you as a low-risk borrower and thereby, approve your housing loan application quickly. However, you must keep in mind that in such cases, you will need to pay a higher home loan interest rate over the repayment tenor.

Keep Your FOIR below 40%

FOIR or Fixed Obligation to Income Ratio refers to your debt-to-income ratio. It is one of the most important eligibility criteria for a home loan. Most lending institutions assume that an estimated 50% of the income needs to be spent on living expenses. Ideally, the FOIR should not exceed 40% when applying for a housing loan. 

Pay Off Your Existing Debts 

Your debt-to-income ratio is one of the first things that a lender will ask for when looking at your loan application. Paying off your existing loans can help increase your chances of getting the loan sanctioned. Therefore, when applying for a loan, make sure you do not have any outstanding debts – be it a previous loan or credit card bills. In case you use your credit card frequently, be sure to repay your dues on a timely basis so you do not end up paying interest on your credit card expenses.

Consider Joint Home Loans

Opting for a joint home loan is another way to boost your eligibility. When you add a co-applicant with a steady job and source of income to your loan application, the lender considers both of you eligible for the loan repayment, and hence, is more likely to sanction the loan application. Moreover, it is easier to manage the monthly EMIs if you have a co-borrower with a good credit score and repayment history. 

Improve Your Credit Score

Banks and financial institutions consider your credit score or CIBIL score to assess your creditworthiness while evaluating your home loan eligibility. While the credit score varies from 300 to 900, the ideal score to qualify for a loan is 750 and above. Timely payments will affect your credit score positively while default in payments will harm your score. A credit score of less than 750 may lead to the rejection of your loan application. To boost your CIBIL score, you must ensure that all your debts, credit card bills and existing loans are paid on time. The higher the score, the better your chances of getting loan approval.

Disclose Additional Sources of Income 

You can increase your home loan eligibility by disclosing any additional sources of income as it will help you secure a greater loan amount and also make you worthy of comfortably repaying the same in the eyes of the lender. This could mean additional income from a side business or a rental etc. 

Avoid Changing Jobs Frequently

Switching between jobs frequently can affect your home loan eligibility as it gives the lender a poor impression of your employment and income stability. You should ideally be able to demonstrate an uninterrupted service (at least 3 years for salaried individuals) to qualify for a loan. 

Summary

The above pointers can help you improve your home loan eligibility so you can easily qualify for the desired amount at affordable interest rates along with other benefits. Start by boosting your credit scores and paying off outstanding debts at the earliest and maintaining a low debt-to-income ratio. Most importantly, do your research and get in touch with a lender who can guarantee faster approvals and loan sanctions.