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7 Key Factors Which Affect Home Loan Eligibility

Updated: Jan 24, 2022
7 Key Factors Which Affect Home Loan Eligibility

Do you know, of all the loan categories, a home loan has the longest repayment tenure that can go as high as 30 years? The very feature that makes it easy for individuals to own a house without worrying about the limited financial resources.

However, having the longest repayment tenure, lenders have to ensure that you meet all the eligibility criteria to reduce the credit risk. In this blog article, we will understand the home loan eligibility criteria in detail and the factors that affect your home loan eligibility.

7 Key Factors which Affect your Home Loan Eligibility

1. Your Age:

While applying for a home loan, a lender always checks your age to ascertain how many years are left to your retirement age. Therefore, if you avail of a home loan two or three decades before retirement age, there is a greater chance of securing a home loan at favourable terms.

But, if you apply for a home loan with less than 10 years left to your retirement, you may find it difficult to secure the home loan and may be asked to meet more stringent eligibility criteria like making a higher down payment, and adding younger co-applicants.

2. Your credit score:

A healthy credit score is an important metric in determining your home loan eligibility. It helps lenders to determine your creditworthiness and the chances of repaying the loan on time. To get approved for a home loan, one must have a minimum credit score of 700, along with meeting all the other eligibility criteria. The higher your credit score is, the better are your chances of the lender approving a home loan application at favourable terms. The credit score offered by CIBIL is widely considered by lenders.

If you have got a low credit score, it is advisable to work on the factors that improve your CIBIL score before applying for a home loan.

3. Your Existing Debt Obligation:

If you are currently repaying existing debts and a significant part (more than 50-60%) of your income goes towards EMI payments, then the chances are higher that your home loan application will be rejected. The ideal debt to income ratio (percentage of income goes towards debt servicing) is 30% or lower to get approved for a home loan at excellent terms.

Therefore, whenever applying for a home loan, ensure your combined EMI (including home loan EMI) doesn’t cross the 30% threshold. You may also use our home loan eligibility calculator to estimate the maximum home loan amount you can get based on your disposable income. If you need a higher amount, you are advised to settle existing debts and/or add a close family member with a good income and credit score as a co-applicant.

4. Your Employment Status:

Your employment status plays a crucial role in determining your home loan eligibility. If you are employed at a reputed private or public sector enterprise, then the chances of securing the loan are good because you are considered a reliable borrower and have a stable income source.

5. Your Income Status:

To avail of a home loan, you need to meet the minimum income criteria, which is determined based on your city of residence, loan amount, and employment status. For instance, if you are residing in a metro or Tier 1 city, then the minimum income criteria will be higher compared to Tier 2 or sub-urban regions because of the high cost of living in Tier 1 cities.

If you do not meet the minimum income criteria , your application will be rejected.

6. Down Payment/ Margin Money:

A lender always looks for the quantum of down payment money you are bringing in for the acquisition of house property. In most cases, lenders require a minimum of 10% of the value of the property as a down payment. For example, if the value of a house property is Rs 50 lakh, you need to make a down payment of at least Rs 5 lakh to secure the home loan. However, the percentage of the property price the lender grants you as a loan (or LTV) will depend on a number of factors, including your location, nature & value of the property, repayment capacity, etc.

It is advisable to use a home loan eligibility calculator to estimate the maximum amount you may be able to get as a loan, and ensure you have the remaining amount as down payment.

7. Number of Dependents:

If you are the sole bread earner of the family and have a high number of dependents, it can affect your home loan eligibility. This is because the more the number of dependents, the lesser will be your disposable income that can impact your repayment capability.

These are some of the key factors that impact your home loan eligibility and should be considered before applying for a home loan. Of all the factors discussed, the CIBIL score and repayment capacity are the most important ones. Therefore, you should not ignore it and be aware of the factors contributing to your credit score. Let’s have a look at the factors that affect CIBIL score.

Top Factors that Affect CIBIL Score Negatively


  • High credit utilization ratio
  • Irregular and irresponsible credit repayment history
  • Paying only the minimum amount due for credit card bills
  • Error in the credit report
  • Not having a proper credit mix
  • Short credit history
  • Making multiple loan applications in a short duration

By addressing all the above-discussed factors, you can make your CIBIL strong and increase CIBIL score over a short period of time.

Must Read : Why to use Home Loan Calculator? And How does it Work

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