In order for a housing loan application to be approved by a bank, applicants must complete a set of eligibility standards. The borrower will be able to repay the loan and will not default if the qualifying conditions are met. If an applicant fails to meet the eligibility conditions, the bank will reject their home loan application, which will have a negative influence on the user’s credit record.
Because of the eligibility conditions, different banks have different interest rates on their home loans. The interest rate on a home loan application is set by the bank based on the applicant’s eligibility. The applicant’s age, income, and CIBIL score all play a role in evaluating whether or not he is eligible for a home loan. Each bank has its own set of eligibility requirements. The general eligibility conditions, however, are the same across all of the country’s banks.
When the lender or bank receives all of your information, it calculates your eligibility using precise ratios. The following are the three most important ratios:
1. The Debt-to-Income Ratio (Fixed)
All of your prior debts and how much you owe on them, as well as the house loan you’ve applied for, will be taken into account by the lender.
2. Return on Investment (ROI)
If your monthly costs are nearly half of your income, the ratio tells the bank how much of your income you should set aside for loan repayment.
3. The Loan-to-Cost Ratio
This ratio is a measure of how much money is borrowed compared to how much money is paid by the applicant. It’s a way of figuring out how much equity you have in your home.
Depending on their demands, different banks may have varying eligibility requirements. The essential eligibility conditions, on the other hand, are the same for all banks. You must meet the bank’s eligibility conditions in order to acquire a home loan. The chart below summarises the basic eligibility requirements that apply to all major banks in the country:
Age Limit (Salaried Individuals)
23 Years to 62 Years
Age Limit (Self-Employed)
25 Years to 70 Years
750 or above
Work Experience for Salaried Individuals
Min. 3 Years of Work Experience
Min. 5 Years of Stable Business Background
A Minimum Salary of INR 25,000
The basic requirements for obtaining a home loan from any major bank in the country are described above. The highest home loan limit for salaried employees is INR 3.5 crore, while the maximum housing loan limit for self-employed individuals is INR 5 crore.
How to Improve your Home Loan Eligibility
Below are some measures that you can adopt to improve your home loan eligibility.
- Make a co-applicant for the loan a working family member, such as your spouse.
- To see if a structured repayment plan is available, contact your lender.
- Ascertain that you have a consistent source of income, as well as regular savings and investments.
- Give specifics on your regular alternative sources of income, such as rental income from a separate property, revenue from a different company than your current one, and so on.
- Keep track of variable pay components including bonuses, commissions, and overtime.
- Examine your CIBIL score and make any necessary changes to improve or correct any problems.
- Ascertain that all outstanding loans and short-term obligations are settled.
These are some of the measures that you can adopt to increase your home loan eligibility. Apart from these, always keep in mind that you should have a good CIBIL score in order to get approval on your home loan application.
How to Improve your CIBIL Score
Improving your CIBIL score would eventually help you in improving your home loan eligibility. Some of the common ways to improve your CIBIL score are as follows:
1. Financial Habits
Making on-time credit card and loan EMI payments can enhance your repayment history, which can help you boost your overall CIBIL score. Your CIBIL score will drop if you miss a credit card or loan EMI payment. As a result, if you want to raise your CIBIL score, you should focus on improving your repayment habits. It also helps you improve your overall repayment habits, allowing you to become a better credit borrower. It also makes it easier for future lenders to give credit to you. Apart from improving or maintaining your credit score, solid repayment habits are regarded favourably in general, and candidates with such habits are more likely to have their loan or credit card applications approved.
2. Having an Old Account
The vast majority of consumers believe that closing old accounts will boost their credit score. This is a misconception, and maintaining an old account will help you raise your CIBIL score. Older accounts are preferred by credit agencies because they demonstrate a long-standing relationship between the borrower and the lender or bank. The type of relationship you have with your present bank will also influence this. If you have a good relationship with your current bank, maintaining an old account will be easy. Similarly, if you’ve had an account with the same bank for a long time, you’re more likely to have a positive relationship with it.
3. Credit Utilisation
The credit utilisation ratio is an important factor that banks examine when calculating your CIBIL score. Maintaining a credit utilisation rate of less than 30% of your credit limit will help you maintain a strong CIBIL score. Reduced credit card monthly repayments arise from using less credit, making it easier to make timely payments and boosting your CIBIL score. It is, nevertheless, vital that you have a substantial credit limit. However, apart from having a higher credit limit, using less credit shows that you don’t need a lot of credit and that you’ll be able to pay on time.
4. Mixture of Credit Types
Combining secured and unsecured loans could result in a strong credit combination. Secured loans, on the other hand, are often long-term loans that can help you boost your CIBIL score. In contrast, a home loan has a longer payback period to demonstrate the borrower’s ability to make consistent payments over time. When computing your CIBIL score, credit bureaus consider your consistent payback history.
These are a few points to help you improve your CIBIL score. Your CIBIL score, on the other hand, will not improve overnight, thus you must be patient if you want to improve your CIBIL score. Therefore, improving your credit score would also help you in improving your eligibility for a home loan.
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