Home Loan Eligibility
Buying your own house through a home loan comes with tax benefits. This helps you to manage cash
flow along with reduction of taxes. You can decide the type of home loan you want. However, it
pays to be in the know of your home loan eligibility and the criteria to be satisfied prior to
applying for one. You can use the home loan funds for purposes such as new house construction,
purchase of a new/used house, or renovation. Irrespective of your occupation/profession, it is
important that you check your home loan eligibility through the online calculator available in
this home loan guide prior to approaching a bank or other financial institution.
Home Loan Eligibility Criteria
Banks and financial institutions that offer home loans will look at several criteria before sanctioning
the loan. Some of the common and important ones are listed below for your ready reference:
Salaried, self-employed, and business people are eligible for applying for a home loan in India.
- You must have completed at least 18 years of age. The probability of getting a loan decreases
with age. Most banks and financial institutions offer home loans to salaried employees in the
age group of 18 years to 70 years. When it comes to the self-employed people, the range applicable
is 21 years to 70 years.
- You should be earning a regular income to prove your ability to repay the loan on time.
- Your savings history and professional stability will also be taken into consideration. If they
are good, the loan will be approved quickly.
- You should not have a bad credit history at least for the three months prior to the month in
which you are applying for a home loan.
- Your minimum net annual income should be in the range of Rs. 120,000 for salaried and Rs. 200,000
- The type of residence you are in – owned or rented – will be taken into account
- Status of residence (minimum one year at the current place) is also an important aspect.
- The type of property you are buying affects the loan amount eligibility.
Apart from the above, some of the other criteria that the lenders often take into consideration are:
Stability of Employment
This is one of the crucial aspects that lenders take into consideration. If you belong to the salaried
class, you should be employed for a period of two years in the present organization. If you are
self-employed, then you should have been earning an income for a minimum of five years. If you
do not satisfy this criterion, your loan application will not be considered at all.
If you are employed in a company that has a high reputation and market standing, your credibility
will be much better.
Apart from your company’s performance, your credit score is also important. The higher your credit
score, the higher the chances of you obtaining a loan with better terms. Defaults in payment
history, not-so-good payment track record, and outstanding loans can all negatively impact
your credit score. The bank may even cancel the loan request or charge a higher rate of interest.
What is Credit Score?
If you are wondering as to “what is a credit score”, it is a statistical number. It evaluates
an individual’s creditworthiness. It is based on a person’s credit history. Lenders often make
use of credit scores for evaluating the probability of an individual repaying his/her debts.
The credit score of an individual can range from 300 to 850. The higher you score, the more
trustworthy you are.
In India, lenders check your CIBIL score prior to approving a loan. TransUnion CIBIL Limited,
the credit information provider in India, maintains credit records of 32 million businesses
and 600 million individuals. It is one of the four credit bureaus that operates in India and
belongs to the American multinational group TansUnion.
When it comes to assessing your financial situation, the lenders take into consideration your present
status and your track record with respect to financial stability.
The eligibility criteria often vary from one lender to another.
Obtaining a home loan becomes much easier if you have a very good financial track record. You
will be able to avail a higher loan amount at a lower interest rate and longer tenure.
Home Loan Eligibility Calculator
When you are applying for a home loan, the first question that comes to your mind is “how much home
loan can I get on my salary?” The home loan eligibility calculator that is included in this guide
will help you to get a fair idea as regards how much you can get. The calculator determines the
amount by considering the following factors:
- Your Gross Monthly Income
- Gross Monthly Income of the Co-Applicant, if any
- Other Loans
- Other Deductions
- Interest Rate (in percentage)
- Loan Tenure (in months)
Documents Required for Home Loan
When applying for a home loan, you are required to submit a host of documents as listed below:
1.0 Completed loan application form affixed with photos
2.0 Proof of identification (any one of the listed documents)
Voter’s ID card
3.0 Proof of age (any one of the listed documents)
10th standard mark sheet,
4.0 Proof of address (any one of the listed documents)
Bank account statement
Voter’s ID card
Utility bill (electricity, water, gas, or telephone less than two months old)
LIC policy/premium payment receipt
Letter verifying customer’s residential address from a recognized government authority
5.0 Income Proof
Salaried individuals (any one of the documents listed below)
Letter from employer (Appointment letter also required if you have been with the current employer
for less than a year)
Last three months’ pay slip
Three years’ IT returns
Six months’ bank statement
In addition, salaried individuals are required to furnish investment proofs such as fixed deposits,
share certificates, etc., and passport-size photographs.
6.0 Self-employed individuals/businessman (any one of the documents listed below)
Last three years’ income tax returns along with income computation and attestation by a Chartered
Last two years’ Balance Sheet and Profit and Loss Account of their firm attested by a Chartered
In addition to the above, self-employed individuals/businessmen are also required to submit:
A brief write up about profession/business
Passport size photographs
Photocopy of Certificate of Registration of the firm under Factories Act/Shops and Establishments
Photocopy of Profession Tax Registration Certificate t
Certificate of Practice
Proof of investments
Advance tax payment receipts, if any
7.0 Property documents required for home loan
Original copy of the sale agreement with the builder
Land and building tax payment receipts
Certified location sketch of the property and Possession Certificate issued by the Revenue Authority
8.0 Allotment letter issued by the Society, Housing Board, or Private builder
9.0 Flat purchase advance payment receipts in original
10.0 Copy of the approved building plan consisting of the key plan and floor plan when purchasing
11.0 Land tax payment receipt in original
12.0 No objection certificate (NOC) in original from the builder or housing society
13.0 House construction cost estimate in detail
Letter from the society, housing board, or builder with their account number and bank’s name
to enable remittance of instalments
This is not an exhaustive list of documents to be submitted when applying for a home loan. The documents
required for home loan approval often varies from one lender to another.