Purchasing a new home is a costly affair. You cannot buy just by depending upon your investment and savings; availing a home loan is important if you are looking to own a home early in your work career. Your home loan eligibility depends on factors like existing loan, credit score, income, age, location, employment type, etc.
Amongst all the factors, your income is one of the most important. If you are a salaried person applying for a home loan, you must earn a decent income to avail quick home loan approval. Banks generally provide a home loan that is sixty times your overall income.
- Role of your salary
Your income is one of the eligibility criteria considered by lenders to assess your eligible home loan amount. Your monthly income contains various components like:
- Basic salary
- Travel allowance
- Medical allowance
- Home rent
While evaluating your income, lenders may factor in both your gross monthly income (GMI) and net monthly income (NMI). Net monthly income is the take home amount after deductions like professional tax, income tax, EPF (employee provident fund) etc. Thus, if your NMI is between Rs 25,000 and Rs 40,000, then your loan EMI usually must not surpass 50 percent of your income. However, if your monthly income is more than Rs 40,000, then ensure your EMI does not cross 65 percent of your income. Gross monthly income, on the other hand, is monthly salary before any deductions.
Also, note that many lenders offer up to 75-90 percent of the home value as loan and the remaining 10-25 percent must be borne by you.
- Your loan affordability
To assess your loan repayment capacity, lenders usually do not depend on your high income. They concentrate on your past credit repayment record, your overall existing debt, and your bank statements. Lenders form a monthly expense report that assists them to understand your disposable income. Depending upon this evaluation, they determine your home loan eligibility amount as per your repayment capacity to create minimal financial strain.
- Your credit report
Your credit report allows the lenders to understand your repayment potential. They do so by assessing the data linked with your credit repayment history and behavior with credit mentioned on your credit report. To be eligible for loan at a lower home loan interest rate, ensure to maintain a credit score of 750 and above. Thus, before you apply for a home loan, it is crucial that you also look at your score. Doing so will help you know about your housing loan eligibility chances.
As a salaried individual, your monthly income and credit score are major determinants in availing a desired amount for a home loan. In case you want to know about your home loan eligibility, you simply can use the home loan eligibility calculator as it instantly provides you with the result based on the details inputted by you. The eligibility calculator basically displays different home loan offers that you can consider based on your repayment capacity and requirement.