A look at the various factors that are usually considered by lending institutions

Home loans are an easy option for buying a house but getting the right amount depends on many factors and this may depend upon many which are listed below. This eligibility criterion is calculated based on your total income and overall liabilities (other financial commitments such as car loan, etc). In case your spouse also has an active income, he/she can be included in the proceedings as a joint applicant this increases your eligibility for a higher loan amount. Usually, your EMI for the loan can be up to 40%* of your monthly income.



Monthly income

If you are salaried person, your per month income and if you are self employed, your yearly profit would identify your home loan max eligibility. The loan amount basically depends upon the net income of an individual and a bank usually provides home loans up to 60 times of an individual net income.

For example if a person take home salary is Rs. 30,000 he or she may be offered a home loan of around Rs. 18 lakh but it may not be so because a bank takes into account other factors as well while granting a loan.

Other loan

Financial institutions also consider that the borrower is paying EMI for any other loan.



Property details

Financial institutions/banks give maximum 85%* of loan against the value of the property. If you want a home loan for a 30 lakh property than you can get is 85% of that i.e. 25.50 lakh.

So based on income and property price banks decide your exact home loan eligibility.

Banks also have certain specific criteria before accepting the property for granting a loan. The banks have specific standard with respect to the minimum area requirements for a flat which may be carpet area or built up area.

The bank also considers the age of the property in case of an existing property the location of the property and also the reputation of the builders constructing the property.

It performs a thorough analysis and inspection of the property to check whether the title is clear or not, or are there any ownership disputes, whether the bank is free from any encumbrances etc.



Credit history

Credit history is basically the credit information report of an individual generated by a credit information company on the basis of individual’s credit records.

On the basis of the credit information report an individual is being given a credit score. Based on the credit score a bank or any other financial institution decides whether the individual is eligible for a loan or not. The credit history is generally affected by outstanding credit card payments and unsecured loans.

In India CIBIL is a reputed credit information company and it analyses the financial records of individuals and awards them a score which is known as the “CIBIL score”.



Age of the borrower

One has to attain a minimum age of 21 to apply for a loan. The minimum age requirement may be different for different lending institution. The maximum age may vary from 58 to 65 years depending on the income source of the individual. The age also determines the tenure and EMI of the loan.

For example, if an individual is 35 years of age and retires at an age of 60 then his / her loan tenure will be 60-35=25 years and his / her EMI will be calculated accordingly.

The longer the tenure, the lower will be the EMI’s. However the longer the tenure, the costlier the loan is as one ends up paying more interest rates.

Co-applicant

In order to enhance the eligibility for having a loan one can have a co-applicant and in this way the total eligible income for having a home loan increases and thus as a result the loan eligibility becomes higher.

However bank permits only certain relationships to become the co-applicant, i.e. those into blood relation, director in a company, partner in partnership firm.
NOTE -  * Indicative may vary