Everyone dreams about their own home, and why not? Having your own house provides a different level of comfort and security. In India, most people buy a house through home loans. They make a certain down payment and avail of a home loan to pay the remaining amount. A bank or other financial institution usually funds the remaining amount.
When getting a home loan, most people are worried about the EMIs. Calculating the EMI is a bit tricky if we use the mathematical formula. But it can be made easy with an EMI calculator. Further, different banks have different eligibility criteria for granting home loans. What are these eligibility criteria? How can you calculate home loan eligibility? Let’s find out!
Eligibility Criteria for a Home Loan
If you must meet the eligibility criteria to get a home loan. The following common eligibility criteria are similar across most banks:
- Age: Generally, the home loan applicant must be between 23 and 70 years of age. Further, there are different criteria for different categories of people. For instance, for salaried people, the minimum age might be 21 years.
- CIBIL Score: CIBIL score is a 3-digit number indicating the borrower’s credit history. A higher CIBIL score makes it easier to avail of loans. It ranges between 300 and 900. To avail of a home loan, a CIBIL score of at least 750 is required by most banks.
- Income: Whether the income earned by the borrower is enough varies from case to case. It depends upon the loan amount, interest, and tenure of the loan. Many banks set a minimum income limit, and borrowers who earn above that limit are eligible for home loans.
- Occupation: Whether the applicant is salaried or self-employed? Is the employment in a public or private company? How much experience does the applicant have? These are important eligibility criteria for banks.
- Property Value: Property value plays an important role in determining the loan amount that the borrower will get. Generally, banks have a maximum Loan-to-Value (LTV) ratio of 80%. In most banks, you will get a maximum loan of up to 80% of the property value. The loan amount further depends on the income level, CIBIL score, etc.
What is Home Loan Eligibility Calculator?
A home loan eligibility calculator is a simple tool that shows you the loan amount you can avail of. You just need to provide a few inputs to know the amount of loan you are eligible for. The following inputs are required for the loan eligibility calculator:
- Profession: What is the profession you are engaged in? Are you a salaried individual or self-employed?
- Gross monthly/annual income: You need to provide your income details. What is your monthly or annual income?
- Existing EMIs: Is there an existing loan or EMI that you are repaying? This is important because existing EMIs reduce your disposable income.
- Interest Rate: What is the interest rate you expect on your home loan? You just need to enter the probable interest rate that may be charged on your home loan.
- Loan Tenure: What is the tenure for which you want to avail of the home loan? The longer the tenure, the lower the EMI. The tenure will impact eligibility. If you select a shorter tenure, it will reduce the loan amount. This is because your EMI will increase because of your short tenure.
Once you provide the inputs mentioned above, you will know the amount of loan that you can avail of. This will give you a clear idea of funding the purchase cost. It will show how much of your home purchase cost will be financed by the bank. You will also know the cost you need to finance.
How to Improve Your Eligibility?
To improve your eligibility for a home loan, you can consider the following:
- Apply for a joint home loan. A co-applicant is one of the most effective ways to improve home loan eligibility. Further, it also increases the loan amount you can get.
- Obtain a well-structured repayment plan. This will give you a quick idea of the loan amount, interest, and EMI you will pay.
- Try to maintain a regular income stream. Two or three streams of income are even better. Further, invest in multiple avenues. Make sure to provide information about extra sources of income when applying for the loan.
- Track the various components of your variable pay.
- Check your CIBIL score. Report any problems to the CIBIL bureau and get them rectified.
- If there are any short-term debts or obligations, pay them to reduce your liabilities.
It is important to fulfil the home loan eligibility criteria to avail of a home loan. A higher home loan reduces your down payment burden. With active steps, you can improve your eligibility. Use the home loan eligibility calculator to know your eligibility. This will ensure that you do the needful to meet the eligibility criteria before applying for the loan and result in a higher loan amount. Good eligibility and a good CIBIL score help lower the interest rate for a home loan. It is time you build your dream home!
For more information about home loans, visit Piramal Finance.