How do I Know if I Can Qualify for a Home Loan?

You are standing in front of your dream home. Buying a property outright may be an option only for a select few. For the majority of Indians, it is back to the good old home loan.

The question, however, is – Is every applicant able to fulfill the home loan eligibility criteria? Let’s find out more.

Methods of Determining Home Loan Eligibility

Financial institutions typically have a list of eligibility requirements for home loan applications. For lenders like SMFG Grihashakti by Fullerton, this includes:

• You should be an Indian resident
• You should be a minimum of 21 years and at the time of loan application a maximum of 60 years if salaried and 65 years if self-employed at the time of loan maturity
• You should be salaried or self-employed

If you are salaried:

• Work in a multinational company, listed public limited company or government service
• Work in organizations private limited companies, closely held or unlisted companies, partnerships or proprietorship firms
• Minimum salary of INR 1,20,000 per annum
• Cash salary applicants will not be accepted
• Minimum work experience of 1 year

If you are self-employed:

• Self-employed individual businessmen or sole proprietorship
• Self-employed professionals such as doctors, architect's, CA’s, etc.
• Partnership firms
• Private limited companies or closely held/ unlisted companies
• Minimum business experience of at least 5 years, with at least 3 years in the current organization.

Additional criteria include a minimum CIBIL score of 700 with a good credit history, repayment capacity, credit utilization, and so on.

Must Read : How Your Credit Score Can Impact Your Home Loan?

You also have the option to use the home loan eligibility calculator which is a free tool available on the SMFG Grihashakti website to determine an estimate of the maximum loan amount you may be eligible for.

Simply enter your monthly income, net monthly obligations, the market value of the property that you wish to purchase or construct, rate of interest and loan repayment tenure to see the maximum loan amount on the right side.

The eligibility calculator for home loans provides an estimate only. The maximum home loan eligibility will be deliberated by taking into account various key factors like age, income, employment status, CIBIL score, credit report, current financial obligations, valuation of the property, and so on as well as SMFG Grihashakti’s policy at the time of loan application.

Documents Required for Home Loan

If you do qualify for a home loan, then you need to submit the following paperwork to process your application. The list includes:

• PAN
• Proof of Identity: PAN card, Aadhar Card, Passport or Voter Id is acceptable
• Proof of Address: Aadhar Card, Utility bill, Passport or Ration card
• Proof of Income: 3 months salary slips, Form 16 for the last 2 years and 6 months bank statements for salaried individuals. For self-employed individuals, 2 years ITR with computation, 6 months bank statements and CA audited Profit and Loss statements
• All applicable property documents

Factors Impacting your Home Loan Eligibility

Multiple factors come into play at the time of determining your home loan eligibility by lenders. Here are some of the key parameters that will enable you to understand if you qualify to apply for a home loan:

The Age of the Applicant: Lenders consider your age as the most important factor at the time of deciding if you are a suitable applicant to be sanctioned a home loan. Generally, lenders like SMFG Grihashakti make it easy for young, eligible borrowers to get a home loan approved quickly. This is because of their extended number of employment years that will be accompanied by a steady income flow.

Young borrowers are able to maximize the repayment tenure whilst still being employed. Mature borrowers may be eligible for home loans too. However, they may be subjected to a shorter repayment period with higher monthly installments.

The Applicant’s Employment Status: There will be several documents required for a home loan that will help the lender determine your employment and income status. Generally, financial institutions like SMFG Grihashakti will require applicants to be employed in a recognized public or private enterprise. Government employees and self-employed individuals can apply for home loans.

For salaried individuals, the eligibility criteria require them to be employed in the current organization for a minimum period of 1year. Your eligibility may not be fulfilled if you change jobs frequently or if there are gaps in your employment status.

Self employed applicants may also apply for home loans with Grihashakti. They should have a business experience of at least 5 years, with at least 3 years in the current business.

The Applicant’s Credit Profile: Your credit history and score are important home loan eligibility parameters that provide the lenders with an insight into your creditworthiness. To be considered eligible, an applicant must have a minimum CIBIL score for a home loan of at least 700. Those with a score closer to 900 may even be able to negotiate good terms (depending on other eligibility criteria).

In addition to the above, the lender will gain an understanding of your credit repayment behaviour from your credit report. If you have taken loans in the past, the repayment history will also be captured in your CIBIL report. Along with that, if you have had any defaults on payments on your loans or credit cards, it may adversely impact your home loan application.

The Applicant’s Income Ratio: When you apply for a home loan, the lender will evaluate your income to ascertain if you have the ability to repay the loan in full within the stipulated repayment tenure. Your income plays a key role in determining the maximum home loan eligibility at the individual level. In addition to that, the lender will also run a check on any existing debt, ongoing loan repayments, mandatory monthly expenses and so on to take a call on your home loan eligibility.

The lenders also check your credit utilization ratio. As a prospective borrower, you should try and keep the utilization ratio within 30% of your credit limit. The lower your credit utilization, the better are your home loan application’s chances of getting accepted at good terms.

Final Thoughts

Owning a home is a once in a lifetime milestone for many. With a range of home loans from Grihashakti, the dream can soon be a reality.

Must Read : Factors affect your Home Loan interest rate and EMI