Before approving a home loan, lenders evaluate various factors to determine whether the applicant is financially capable of repaying the loan. The eligibility criteria vary based on the lender, but the following are the key factors considered.
1. Age Criteria
- Salaried Individuals: 21 to 60 years
- Self-Employed Individuals: 21 to 65 years
- The loan tenure is structured to ensure that the borrower repays the loan before retirement.
2. Income & Employment Stability
Lenders assess income to determine repayment capacity.
For Salaried Individuals:
- Must have stable employment with at least 2–3 years of work experience.
- Minimum monthly salary requirement varies by lender but generally starts from ₹25,000 (depends on city and loan amount).
For Self-Employed Individuals & Business Owners:
- Should have a profitable business with at least 3 years of stable income.
- Must provide Income Tax Returns (ITR), Profit & Loss statements, and bank statements.
3. Credit Score & Credit History
- A credit score of 750 or above improves loan approval chances.
- Lenders check past loan repayment history, outstanding debts, and credit utilization.
- A lower credit score (below 650) may result in a higher interest rate or loan rejection.
4. Loan Amount & Repayment Capacity
- Lenders approve loan amounts based on the applicant’s income-to-loan ratio.
- Typically, the EMI should not exceed 40-50% of monthly income.
Example:
- If your monthly income is ₹50,000, your maximum EMI eligibility would be around ₹20,000 to ₹25,000.
5. Loan-to-Value (LTV) Ratio
- Banks typically finance 75% to 90% of the property’s value.
- The remaining 10% to 25% must be paid as a down payment by the borrower.
Example:
- If the property costs ₹50 lakh, and the bank offers an 80% LTV, you will need to pay ₹10 lakh as a down payment.
6. Property-Related Eligibility
Lenders ensure that the property meets legal and technical requirements:
- The title should be clear with no legal disputes.
- The property must have government approvals (RERA registration, approved building plan).
- For under-construction properties, the builder should have a credible track record.
7. Co-Applicant Eligibility (For Joint Home Loans)
- Adding a co-applicant (spouse, parent, sibling) can increase loan eligibility.
- Both applicants must have a stable income and be co-owners of the property.
- Co-applicants can also claim separate tax benefits under Sections 80C & 24(b).
8. Existing Loan Obligations
- Lenders check your existing loans (personal loan, car loan, credit card debt, etc.).
- A high debt-to-income (DTI) ratio (above 50%) can reduce home loan eligibility.