With many significant changes, the housing sector has seen rapid growth, and buyers can finally purchase their dream home without hindrance. Lowered property prices, reduced interest rates, multiple tax incentives, and government schemes like PMAY introduced recently gave the real estate market a much-needed boost and allowed aspiring homebuyers an opportunity to realise their dreams.

To this end, the demand for home loans is estimated to grow from 28% to 40% by 2025.

Now, approval of a housing loan depends on several factors, and among them, meeting the home loan eligibility parameters is essential for an applicant. If a borrower is unable to fulfil the eligibility terms, the loan application can be rejected, leaving a negative impact on one’s credit score.

Home loan eligibility criteria

The terms and conditions of housing loan eligibility differ across financial institutions. Nonetheless, the following is a list of some of the factors that are common for most lenders.

  • Age

An applicant’s age is an essential factor that financial institutions consider while processing a home loan application. For salaried individuals, the age bracket ranges from 23-62 years, and self-employed individuals should be within the age bracket of 25-70 years to meet home loan eligibility criteria.

  • Credit score

Credit score indicates one’s creditworthiness and is a significant factor in deciding home loan eligibility. A credit score above 750 is considered standard for eligibility and increases loan approval chances. It also enhances the possibility of better repayment terms and interest rates. A score below 700 can lead to loan application rejection and make one bear a higher interest rate. The CIBIL score for a home loan is something a borrower should know in details before applying.

  • Work experience

For some financial lenders, salaried individuals should have a work experience of a minimum of 3 years, and for self-employed individuals, a minimum of 5 years is mandatory.

  • Debt-to-income ratio

To comply with home loan eligibility, the percentage of financial obligations against your income should not cross 50%. A higher debt-to-income ratio means a significant proportion of the salary or income will go towards paying existing debts, which leaves a probability of defaulting on repayment in the future. Therefore, if the debt-to-income ratio is more than the standard mark, the lender might not approve it.

  • Property value

Based on RBI guidelines, the LTV value for a home loan can’t exceed 90% of the property’s value. This indicates that one has to make a down payment to purchase a house. If an applicant contributes more towards a down payment, it further reduces the loan amount and LTV ratio, thereby increasing eligibility to avail the amount applied for.

  • Essential documents

Apart from complying with the eligibility requirements, individuals also need to submit a list of documents to attain loan approval. Following are a few KYC documents that applicants need to submit for loan approval –

  • PAN
  • Passport
  • Aadhaar
  • Birth certificate
  • Voter ID
  • Driving license

Apart from all these, the simplest way to calculate home loan eligibility and answering the question of “how much loan can I get” is to use the online eligibility calculator provided by almost all financial lenders. Moreover, reputed HFCs extend pre-approved offers that can nullify the hassles of loan approval.

These offers are available on other facilities such as loan against property, home loan and more. Hence, borrowers can check their pre-approved offer by sharing basic details like name and contact information.

On complying with these parameters, individuals can easily avail a home loan and finance the purchase of their dream home without hassle.

You can also read: Home loan Lender

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