India’s rapid urbanisation and affordable loan offerings are among the fundamental reasons that have increased the demand for a home loan. As per reports, the home loan market is anticipated to grow at a rate of 22% between 2021 and 2026.
In turn, it has made affordable housing accessible to both salaried and self-employed borrowers.
- In 2020, the salaried segment accounted for around 88% of the loan market share.
- As per reports, the first 6 months of 2020 witnessed at least a 10% surge in the number of housing loan customers.
Financial institutions offer such credits only to individuals who meet the specific set of eligibility criteria. One can find out if they can avail a housing credit by using home loan eligibility criteria calculator.
It can help a prospective home buyer to ascertain their creditworthiness and allows them eliminate the chances of application rejection. This is why first-time homebuyers should check the latest home loan criteria before applying to secure a substantial loan.
Home loan eligibility criteria
Generally, leading financial institutions lay down different eligibility criteria for both salaried and self-employed applicants. Individuals must become familiar with the factors that affect home loan eligibility as well as the prerequisites to avail such a credit.
Typically, applicants’ age, CIBIL score, LTV ratio (Loan To Value), monthly/annual income, occupation and property value tend to influence loan approval significantly.
These following pointers elucidate the noteworthy loan eligibility criteria –
- Salaried individuals
Home loan eligibility criteria for salaried individuals are as follows –
- Residing Indian citizens between the age of 23 years and 62 years.
- Applicants must have a clean credit report.
- They should have a stable source of employment and work experience of at least 3 years.
- Must earn a minimum salary as specified by the concerned financial institution.
- Self-employed individuals
Housing loan eligibility criteria for self-employed individuals are given below –
- Resident Indians between the age of 25 years and 70 years.
- Applicants should have an impeccable credit history.
- Their business should have a minimum vintage of 5 years.
- They must generate a minimum turnover as specified by the financial institution.
Individuals can determine their eligibility for a loan instantly by simply using a home loan eligibility calculator online and proceed with their application accordingly. However, to maximise their chance of securing loan approval at better terms, one must improve their creditworthiness beforehand.
Tips to enhance home loan eligibility
These following tips are considered useful in enhancing home loan eligibility –
Tip 1: Improve the CIBIL score
A healthy CIBIL score for home loan serves as a potent indicator of one’s creditworthiness. Therefore, applicants must improve the same to secure better terms of repayment and other features.
Generally, most lending institutions prefer applicants who have a CIBIL score of 750 and above. Individuals can improve their current score by clearing existing debt on time and also by maintaining a low credit utilisation ratio, preferably below 30%.
Tip 2: Clear existing debt
Applicants need to maintain a low debt-to-income ratio to enhance their loan eligibility. The best way to achieve the same is by paying off all existing debt before applying for a new home loan.
As proof of closing all their previous loan accounts, individuals must acquire a ‘No-dues’ certificate for loan closure from the existing financier. Subsequently, they should ensure that the same is reflected in their credit report and CIBIL score. Once it is updated, they can use a eligibility calculator for home loan to determine their chances of successfully availing a credit.
Tip 3: Co-apply for the loan
To increase the chances of getting the credit application approved, an individual may consider taking a joint home loan, typically with a parent, spouse, son, daughter or sibling.
Unlike regular housing credit, this arrangement is less cumbersome and also offers certain tax benefits on constructed property under ITA. Also, it entitles them to avail a substantial loan amount due to improved creditworthiness.
Notably, some leading financial institutions also extend exclusive benefits to individuals if they co-apply for a loan with their respective wives. In this case, their spouses also have to hold the ownership of the property.
Reputed HFCs also provide pre-approved offers to their existing customers to make the process of availing a credit hassle-free and quick. Generally, such offers accompany financial products like home loan and loans against property. Check your pre-approved offer online by entering your name and contact details.
Tip 4: Pick lengthy repayment tenure
By opting for long repayment tenure, individuals can increase their chances of successful loan approval. Typically, longer tenure helps lower the loan EMI amount and facilitates easy repayment.
However, long repayment tenure tends to increase overall interest burden as it is charged on the outstanding loan amount.
Other than these, one must avoid applying for multiple loans at the same time. The verification process requires financial institutions to make hard enquiries about the applicant. Such enquiries tend to stay on the applicant’s credit report for a long time and often erode existing credit score.
Furthermore, individuals should also try to increase their sources of revenue to boost their repayment capability. Once these strategies are followed, individuals should use a home loan eligibility calculator to gauge the difference more effectively.
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