Eligibility and Criteria You Must Meet To Avail Home Loan

After the 2021 Union Budget, the RBI continued to maintain its slashed repo rate at 4%. It was last lowered by 40bps in May 2020, due to the ongoing economic turmoil at the time. Consequentially, financial institutions continue to lower housing loan interest rates, apparently making such financial aid available to more individuals.

However, individuals must be aware of the several parameters and requirements mandated by different financial institutions. Not knowing of the lender-specific home loan eligibility criteria before applying can lead to delay in loan approval and even loan rejection.

Some of the standard eligibility parameters followed by leading HFCs demand the following.

1. Qualifying age: Financial institutions specify an eligible age bracket of 23 to 70 years. Applicants of a low age are more likely to secure a home loan. On the other hand, lenders are less likely to approve applications of self-employed individuals nearing retirement. This is because they predict a low repayment capacity of the latter in future.
2. Healthy credit history: A minimum CIBIL score of 750 and a clean repayment history build creditworthiness of borrowers. Previously rejected loan applications and existing home loan EMI defaults can bring down your credit score significantly. Avoid these practices for speedy loan approval.
3. Job stability: This is an important deciding factor for lending institutions since it indicates an applicant’s cash flow status. Most lenders require applicants to be salaried with an employer for at least 3 years or own a profit-generating business for over 5 years.
4. Low debt-to-income ratio: Housing finance companies mandate that total EMI, including home loan interest, must not exceed 40% of a borrower’s monthly income. The lower the debt-to-income ratio, the higher your chances of approval.
5. Suitable property: Properties in accessible locations are the most sought-after options and have high resale values. Lenders approve home loan for such properties more readily since these offers enhanced security and serve as better collateral.

Plus, if you are adding a co-applicant, make sure he/she possesses a high CIBIL score. This can enhance your home loan eligibility significantly.

Also, make sure to maintain a proper tax history and provide all necessary documents with your application form.