Criteria To Get a Housing Loan in Banks: When applying for a loan, banks consider several criteria before sanctioning it. Among the many factors, some important ones are:
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It is a crucial aspect of home loan consideration. Unless the applicant is employed for at least 2 years in their current profession (for salaried individuals) or has a minimum of 5 years of total earnings (for self-employed individuals), the loan will not be processed.
The younger the applicant, the more likely they are to get a loan. Most banks offer home loans for salaried employees between the age group of 20 to 60 years. However, for self-employed individuals, the age limit changes to 24 to 65 years.
Apart from the applicant’s company’s performance, individual credit rating is of utmost importance. A good credit rating will increase the chance of getting a loan with more flexibility on loan amount, EMI, tenure, and interest rates. Default payment records, fraudulent tracks, and outstanding loans will negatively impact the applicant, leading to the bank canceling the loan request or charging a high rate of interest.
If the applicant is working with a reputable employer with an impressive turnover, the applicant’s credibility will increase. Being a part of reputed and high-turnover companies is an asset for the applicant when applying for a home loan.
Records of financial stability hold a lot of value in deciding eligibility for a home loan. Good financial records can decide the interest rate percentage, loan amount, and tenure when applying for a loan.
Banks have a method for calculating home loan eligibility. Initially, every bank says it can offer 30 times the net income, but when the loan is being processed, things change. The eligible loan amount will fall, and many other criteria will have a call on the loan amount and interest rate decision. It is advisable to be aware of how banks calculate home loan eligibility. Net income is the total Basic salary, HRA (House rent allowance), Medical allowance, LTA (Leave travel allowance), Performance bonus, Special allowance, Conveyance allowance, PF, Food coupons, and any other allowance. However, when it comes to home loan net income calculation, only a few of these are considered. Banks exclude LTA and medical allowance while calculating net income. Thus, the calculation is Net income minus (LTA+ medical allowances amount) = New net pay.
Criteria To Get a Housing Loan in Banks?
To calculate home loan eligibility, banks follow these steps:
- The bank looks into your salary slips and bank statements to calculate the income level.
- It then calculates the amount that is saved. The bank usually assumes 30% of your income as savings. For instance, if your income is ₹50,000, then your savings are ₹15,000.
- If there are existing loans, EMIs will be reduced from the income.
- Banks do a backward calculation to understand how much loan amount can be offered according to the saving amount determined.
The top 3 banks that offer home loans in India are SBI, ICICI, and Axis. Loan eligibility criteria for each of these providers differ according to various factors.