When an individual wants to purchase a house, he/she generally applies for a home loan. Applying for a home loan can be challenging. Eligibility for a home loan is based on number of factors, such as:
- Monthly Income
- Credit Score
- Fixed monthly obligations
- Retirement age
Banks conduct a thorough check-up before loan approval. They check whether the individual has the repayment capacity for the home loan.
Case breakdown: Movie Love per square foot:
The scene that you just saw shows how Sanjay Chaturvedi (Played by Vicky Kaushal), isn’t eligible for Rs. 50,00,000 loan. As the actress explains salary is a factor due to which loan is being rejected.
She mentions that the bank has a policy i.e. banks have a check-list that needs to be fulfilled by the customer before granting the loan. Lenders or banks charge an interest rate that needs to be paid along with the principal. This is the cost for lending you the money. This rate significantly comes down, if you are a bank employee.
Eligibility for a home loan:
Current age and time left for retirement:
Age is a major factor as this determines the number of years of the loan. Maximum loan term is capped at 30 years. Age limit for salaried and self employed people ranges between 21 to 65.
Minimum salary to avail a loan is Rs. 10,000 per month and for a self employed individual at least Rs. 2,00,000 pa.
Ability of the individual to repay the loan today and in future plays a significant role in ascertaining the amount of loan.
This is capped at a maximum of 30 years.
Credit score and history:
This is another check-point for a bank to know whether the individual has a good credit history or not. Making timely payments in the past is a green check mark.
Does the individual have any other obligations that he/she needs to fulfill such as a car loan, personal loan etc.
Documents required for a home loan:
- Filled Home loan Application
- Passport Sized photographs
- Identification Proof
- Age Proof
- Residence Proof
- Income documents for Salaried employees
- Property documents
For a self-employed individual, he/she needs to submit business license details, P&L and balance sheet details of the company, income tax return (ITR) for the last 3 years, license of professional practice (such as doctor or lawyer), proof of business and registration certificate of a business.
How can home loan eligibility become easier?
- Adding a earning family member to the loan.
- Ensuring steady cash flow and savings.
- Improving credit score.
- Structured repayment loan can be availed.
Applying for a home loan can be a tedious process, paying EMIs for 15-30 years too can be challenging as well. Feeling might differ when you have keys to your first house in your hands and that will make it all worthwhile.
Written by: Ms. Gitika Chandra