As housing financing companies simplify the eligibility criteria and reduce the cost of borrowing, the demand for home loans has been increasing in the country. A report from NoBroker.com states that demand for housing credits in several Indian cities has increased by 25-40% post pandemic.
While the terms against this advance have been simplified, it is still crucial to understand home loan eligibility criteria to avoid facing rejections. While these requirements may vary from one lender to the other, let’s take a look at a few of the general criteria that individuals have to fulfil to be deemed eligible.
Home loan eligibility criteria
Both salaried and self-employed applicants can avail of a home loan, but the eligibility criteria differ for each.
- For salaried applicants: Between 23 and 62 years
- For self-employed applicants: Between 25 and 70 years
- Residential status/ citizenship: Must be resident Indians
- Credit score: 750 and above
- Work experience:
- For salaried applicants – 3 years and above
- For self-employed applicants – A vintage of at least 5 years for the present business
- Monthly income: Varies as per the applicant’s city of residence
These are some of the home loan eligibility parameters that remain constant among financial institutions. Nonetheless, there are lender specific requirements that borrowers need to meet to avail of the credits successfully.
At the same time, individuals should also understand the ways to improve the eligibility criteria to increase their chances of securing a loan at better terms.
Top ways to boost one’s eligibility
Here are some tips on improving one’s eligibility to avail of a housing loan:
Improving your credit score
Credit score is a three-digit number assigned to every individual that represents his/her creditworthiness. Therefore, it is imperative to maintain a high rating here to avail a home loan without fail. In this regard, individuals can adopt necessary measures such as paying off their existing debts and maintaining a low credit utilisation ratio to improve their credit score.
Prospective applicants can also get rid of any discrepancies in their credit report to keep it clean and improve their credit score. They can also take the assistance of a home loan eligibility calculator for more information.
Maintain a FOIR of below 40%
Fixed Obligation to Income Ratio, or FOIR, indicates the percentage of an individual’s income that goes towards servicing necessary expenses such as debt repayment and rent, etc. For instance, if your monthly income is Rs.20,000, and your fixed expenses are Rs.12,000, you spend 60% of your salary on obligations, leaving less room to manage another loan repayment.
Maintaining a FOIR of above 40% is not advisable as it lowers the eligibility of a home loan applicant. Thus, borrowers can work accordingly to meet these eligibility criteria before applying for home loans and avoid any rejection.
Joint home loans can help
An easy way to improve eligibility for home loans is to go ahead with a joint loan application. In case an individual cannot satisfy the eligibility parameters alone, he/she can apply with a co-applicant.
Here, the financial institution will consider the aforementioned parameters of both the individuals and then sanction a loan. Also, borrowers can avail of a better housing loan interest rate here if the co-borrower scores high in satisfying the eligibility.
Including different income sources
Since monthly income is an important parameter, individuals can include their income from additional sources apart from their primary one to improve on this pointer. Doing so will also increase the repayment capacity of an individual, which will lower the FOIR.
Keeping these pointers in mind will help borrowers to work and improve their chances of securing a home loan.
Nonetheless, existing borrowers of reputed financial institutions can avoid the hassle of application with a pre-approved offer. These offers are available on various financial products, including home loans, loans against property, etc. Borrowers can check their pre-approved offer by submitting their essential contact information.
Meeting the home loan eligibility criteria is where a housing loan application process starts. Thus, individuals should learn about this process and its particulars in detail to avoid any complications.