India’s home loan market is expected to maintain a steady growth rate of around 22% until 2026, thanks to affordable lending rates and growing urbanisation. Rising demand for these loans is thus expected in the near future too.
- Interestingly, salaried individuals comprised around 88% of the housing loan portfolio in 2020.
The limited spending ability of salaried individuals may be responsible for their increased need for home loans to finance a property purchase. However, regardless of whether one is salaried or self-employed, understanding the home loan eligibility requirements is essential when looking for such credits. So, here’s a quick look at the standard criteria prevalent in the housing finance market.
What are the eligibility criteria for home loans?
Housing loan eligibility criteria differ from one lending institution to another. Nevertheless, listed below are some of the basic requirements that an applicant needs to adhere to when applying for a home loan.
- Their age should be between 23 and 62 years. The maximum age for self-employed applicants may be slightly higher.
- An individual must also hold a steady monthly income of not less than Rs.25,000. Some lenders may require additional monthly income, depending on the region of the borrower’s residence.
- A business should be operational for at least 5 years.
- Salaried individuals must carry a work experience of at least 3 years.
Some lenders lay down varying home loan eligibility criteria for salaried individuals as opposed to self-employed applicants. The best way to assess whether one is qualified to avail such credit is to enquire with the selected lender. One can also utilise a home loan eligibility calculator from the chosen lending institution for a suitable borrowing assessment.
Individuals who currently fail to qualify for housing loans can improve their chances by following a few simple steps.
Ways to improve your eligibility for a home loan
Home loan eligibility parameters are critical to determining whether one can acquire the funding necessary to purchase a home. Here are some aspects where one should focus on when trying to increase such eligibility –
- Reduce existing loans or debts
If an individual services one or more debts at present, he/she is likely to encounter repayment eligibility hurdles during home loan approval or may end up with rejection altogether. Since much of the current income is tied down in servicing existing dues, HFCs may be reluctant to extend additional credit to such an applicant. Therefore, reduction of existing debt is a major factor that can affect one’s home loan eligibility. It is thus ideal to pay off your existing loans before opting for a housing loan to stand a better chance of hassle-free approval.
- Clear credit card bills in time and in full
Credit card debt can be particularly challenging to deal with, especially when opting to pay the minimum amount due for a few consecutive billing cycles. Further, as these credit tools can critically contribute to one’s eligibility for future advances, it is all the more essential to keep track of your card’s bill payments.
Thus, credit card users looking for a home loan must ensure that they pay off all the dues. Non-payment or delayed payments can not only hamper one’s CIBIL score but also prevent housing finance companies from extending housing credit to him/her.
- The Indian credit card industry is currently facing a tumultuous period due to the extensive outstanding amount.
- As per an October 2020 report, the total outstanding on credit cards exceeded Rs.1 lakh crore for the first 5 months of the current fiscal.
To ensure adequate home loan eligibility fulfilment, card users must service outstanding bills within their due dates and in full.
- Avail a home loan with a co-applicant
Applying with a co-applicant for one’s home loan can help bolster the approval prospects significantly. Lenders consider the eligibility of a co-borrower in conjunction with the primary applicant before sanctioning a housing credit.
For instance, if an applicant’s monthly income is Rs.18,000, he/she would find it difficult to avail a home loan of the required amount. However, if his/her spouse, earning Rs.15,000 a month, becomes a co-applicant, the couple would qualify for this form of credit easily.
- Build your CIBIL history
CIBIL score is the measure of creditworthiness of an applicant with 750 as the minimum score quantifying suitable eligibility for advances. While it is not an essential requirement for home loans, an improved credit score always adds leverage to housing finance approval.
If one’s score is insufficient, he/she would thus first need to build the rating. Doing so means repaying existing dues in time, maintaining a balanced credit, mix and limiting one’s credit utilisation ratio to 30% or lower, among other factors.
Additionally, an individual should check the credit report for errors. Notifying CIBIL about such errors, if any, can often lead to a significant improvement in one’s credit score over time. A higher score not only increases your chance of availing home loans but also lets you negotiate for better terms on the credit.
Reputed lenders provide pre-approved offers to eligible home loan applicants, expediting the loan approval process. These offers are available on housing loans, loans against property, and other such funding options. One can check his/her pre-approved offer by submitting a few essential details.
A borrower must check home loan eligibility criteria before applying to avoid encountering credit rejections. While such rejections hurt one’s credit scores, they eventually limit access to financial assistance in the future.
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