Understanding Home Loan Eligibility Criteria of Top Banks

The dream of owning a home is one that many people share. It's a symbol of stability, security, and comfort. But for many, the dream of homeownership can seem out of reach. One of the biggest hurdles to buying a home is getting approved for a home loan. Lenders have strict home loan eligibility criteria that borrowers must meet to qualify for a desired amount.

Table of Contents

• Home Loan Eligibility Criteria in India 
• Home Loan Eligibility Criteria of Top Banks/NBFCs
• Home Loan Eligibility Formula 

If you're thinking about buying a home, it's important to understand the home loan eligibility criteria of different banks/NBFCs. It will help you determine if you're eligible for a loan and how much you can borrow.

Home Loan Eligibility Criteria in India 

The eligibility requirements for a home loan vary from lender to lender. However, there are some general requirements that most lenders will follow.

1. Age 

Lenders consider the borrower’s current and retirement age as key factors in determining home loan eligibility. With the maximum loan tenure capped at 30, most lenders require borrowers to be at least 18 years old while applying for a home loan and no older than 65 years at maturity.

As a rule, banks calculate home loan eligibility based on the number of working years the borrower has left before retiring. For instance, a  person who has 10 working years remaining is likely to have a weaker ability to pay loan instalments than someone with 20 years.

2. Personal Profile

Other than age, factors such as nationality, gender, and educational qualification are also considered when determining home loan eligibility. Additionally, lenders may consider a person’s professional profile, whether she/he is employed or self-employed.

3. Credit Score Report 

Credit history or credit is a reflection of a person’s past payment behaviour on a credit card or a loan. This information allows a lender to decide whether to approve the new loan amount. A person with an average credit score of 750 has a higher chance of qualifying for a mortgage loan than a person with a credit score of 550. Moreover, having a higher credit score also ensures a larger loan amount at a low interest rate. Hence, it is advised to keep your cibil high by paying your debts on time. 

4. Income Stability 

Before approving a home loan, banks and NBFCs also look at the borrower's repayment capacity, including the applicant's income, employment status, assets, existing savings, and other sources of income. This ensures they have enough income to afford the monthly payments and that the EMIs charged do not exceed 50% of the income. 

The higher your monthly income, the greater the space for loan repayment. Therefore, it’s always better to calculate repayments beforehand. One way to check the repayment schedule is by using a home loan EMI calculator.

5. Financial Obligations

A lender's decision to approve a housing loan can be greatly affected by a borrower's financial liabilities, such as student loans, personal loans, and credit card debt. The repayment history on these types of debts is taken into account when computing loan eligibility, as this ensures that a person will have the means and ability to make the necessary payments on the loan.

With all the existing liabilities involved, it helps them determine whether the borrower can manage the debt repayment. For instance, an institution may view a borrower as a higher risk if he or she has a large credit card balance and a high-interest rate on the loan.

6. Property Type

The traits of the desired property include the location, type, age, or condition, and estimated value of the property. Lenders inspect the type of property to determine the level of risk associated with the loan. They also assess the revenue it will generate and its potential to appreciate over time. 

A property in a desirable location with good condition often yields higher loan approval rates. Conversely, a property with the poor condition will likely receive an unfavourable assessment. 

Home Loan Eligibility Criteria of Top Banks/NBFCs

Those interested in taking out a home loan should check the eligibility criteria sought by top banks.

HDFC Home Loan Eligibility

SBI Home Loan Eligibility

PNB Housing Finance Home Loan Eligibility

ICICI Home Loan Eligibility

L & T Finance Home Loan Eligibility

AXIS Bank Home Loan Eligibility

**The home loan criteria are subject to change at the discretion of the bank. Check the bank's official website for the latest information. 

Home Loan Eligibility Formula 

For calculating your eligibility, home loan lenders compute some ratios. 

Debt-to-income (DTI) ratio 

This ratio is calculated by dividing your monthly debt payments by your monthly income. A higher DTI indicates that you may have difficulty maintaining loan payments, putting you at a higher risk of default. Generally, lenders expect a DTI of 36% or less. 

Down Payment 

An adequate down payment reduces the loan size and indicates the borrower’s commitment to the loan and ability to save money. The amount of the down payment helps calculate the loan-to-value (LTV) ratio. Lenders typically limit the LTV ratio to 80%. This means that you will need to make a down payment of at least 20% of the purchase price. However, some banks or NBFCs might offer loans with a lower down payment, such as 10%.

FAQs Home Loan Eligibility Criteria of Top Banks