If you are thinking of buying a residential property, then one of the questions that are probably foremost on your mind is how to go about arranging the capital required. Most buyers today prefer to get a home loan to finance their property purchase.
What is the eligibility for getting a home loan?
Home loans are offered by most banks and NBFCs as they are considered a relatively secure asset by them. However, there is still the eligibility criterion to meet for you to be able to get that loan.
Capital available with you
To finance your property acquisition, banks expect you to fund 20% of the cost of property through your own funds. The remaining 80% is provided by the bank. This proportion can also change as per individual profile. So the first requirement is funding capacity on your behalf.
Your Credit Score
Banks determine the risk involved in a home loan case on the basis of applicants credit score. As you must be aware, your credit score is linked to your PAN number and is accessible to financial institutions for risk assessment.
Applicants with high credit score are eligible for a lower interest rate and lesser capital share of the home loan. The capital requirement could be reduced from 20% to 10 % in some cases.
Other factors like age, past payment history and years left for retirement are also considered.
Your Monthly Income
Along with identity documents and PAN number you would be asked for your bank statement and/or IT returns if you are a business person. Your monthly income determines the amount of home loan you would be eligible for.
The maximum amount the Equated Monthly Installments (EMI) can go up to is 50% of your monthly income. This 50% is considered surplus income and EMI and loan amount eligibility calculated on its basis. For example, if your monthly income is Rs 1,00,000/month then your EMI can be a maximum of Rs 50,000/month.
However, in case of an ongoing loan i.e car loan, personal loan your monthly income minus that loan’s EMI is considered as the available monthly income. So 50% of the available monthly income is the maximum EMI limit.
Type of Property for which home loan is required
Home loans are available typically for apartments, flats, and villas constructed as part of authority approved projects. Purchase of plots and freehold land are usually not financed by banks. An exception in this would be a house constructed on authority approved society plot which is eligible for financing. Some examples of authority approved projects are given here.
Getting a home loan is one of the most preferred ways of financing a property purchase. Share this article with your friends through the social media links given at the end of this article. You can use this free tool to calculate your EMI here.