Home Loan Affordability In India

Are you planning to take a home loan? If yes! then are you aware of the loan amount which can be approved to you?

Home loan market is growing day by day in the country, and now it’s easily available even to the common masses. Though it is easily available, getting a home loan of your desired amount is. Hence it is suggested to research well with a proper and complete understanding of the Home Loan Eligibility. Before you apply for a home loan it is highly recommended to check your eligibility and know your affordability. 

Understanding Home Loan Eligibility

Home loan eligibility is a term given to specify your home loan affordability. It also signifies – how much loan amount you will get through a home loan. 

Home loan eligibility is determined by certain factors which include the borrower’s age, income, type of job/employment, credit score, employer and many more.

Let us understand home loan eligibility with the help of an example- 

Mr. Naresh is 40 years old, working in an MNC in Bangalore. His annual gross income is ₹8 lakhs. He wants to purchase a property in Bangalore which is worth ₹80 lakhs. Here, Mr. Naresh’s home loan application is on a higher verse of rejection. This is because lenders have some fixed eligibility criteria to approve any particular loan application. And in this case, the gross income of Mr. Naresh is low in proportion with the loan amount he wants. 

This doesn’t mean that he is not eligible for a home loan, but the thing is he is not eligible for a higher loan amount. 

Another important eligibility criteria which are responsible for your home loan approval and rejection is your CIBIL score. So, if you have a good CIBIL score then you have higher chances for your loan approval. 

You must be thinking, what if our eligibility is low? We will be able to take a home loan or not? will it be a small loan amount if it is approved? 

Here is the answer to all your question – 

There are tricks to increase your eligibility and get a loan amount that you desire.

Factors that Help in the Enhancement of your Home Loan Eligibility:

  • Good Repayment History
  • A fixed source of income
  • CIBIL Score +750
  • Working spouse
  • A Co-applicant 
  • A Co-borrower
  • Another source of income on top of your salary
  • The lower credit utilization ratio

Tips to Increase your Home Loan Eligibility

Adding your Spouse’s Name as Co-applicant

adding your working spouse as a co-applicant for your joint home loan can increase your home loan eligibility. Doing this can also help you in getting a higher loan amount by the lender.

As a matter of fact, Co-applicants can be your spouse, family members or your siblings. By adding co-applicant the EMI affordability increases and lenders find it more secure to lend. Some lenders even get ready to lend at comparatively low-interest rates.

By Adding any other Source of Income

Adding other sources of income also helps you to increase your home loan eligibility. You can add your rental income, part-time business, rent from equipment, farms, shares, etc as other sources of income. Adding any of these on top of your fixed monthly income shows the good financial health of yours and hence, lenders find it secure to lend you a higher loan amount.

Improve your CIBIL Score

CIBIL score is one of the most important criteria which decides your loan approval or rejection. It is one of the major components which decides your home loan eligibility and the loan amount which will be approved to you. 

A credit score above 750 is always considered good and is proof of your creditworthiness. Lenders find it risk-free to lend money to a borrower with a good CIBIL as it indicates their good repayment history. 

So, if you are planning to take a home loan, first check your CIBIL score. In case you find it low, take steps to improve it. Read our blog to improve your CIBIL Score.

Repay your Previous debts 

Repaying your previous debts not only helps you build a good credit score, but also decrease your credit utilization ratio. This further enhances your home loan eligibility. Additionally having some savings and investments can also increase your home loan eligibility.

Some Quick Tips to Increase Home Loan Eligibility

  • Eliminate your credit card debt.
  • Pay your bills and loan’s EMI timely without any default.
  • Check your credit score every 6 months.
  • Add your parents/spouse as co-owner and co-applicant for your home loan.
  • Go for a longer repayment tenor
  • Declare other income sources of income such as returns from investments, rentals, etc.
  • Choose a good real estate project by reputed builder.