What Is The Home Loan Eligibility Criteria For Salaried Individuals?

For most salaried individuals, buying any residential property seems to be an impossible task without availing of a home loan. While most banks and financial institutions offer home loans, they do so based on certain conditions. The conditions, also known as eligibility criteria, vary from person to person depending on a variety of factors. Every bank and financial institution adheres strictly to the eligibility criteria for approving or disapproving the home loan application of individuals. Hence loan applicants need to gain detailed information about eligibility criteria, the various factors affecting it, and how to enhance the same in their favour to maximise their chances of loan approval.  

Understanding The Term Eligibility Criteria

Eligibility criteria can be simply defined as a set of conditions used by lenders to assess the loan repayment capacity of the applicants. These conditions enable the banks and financial institutions to understand the current financial condition of the applicants as well as their future prospects. While some conditions are similar across the board for all loan applicants, others vary significantly depending on specific aspects of the applicants. The eligibility criteria also play a critical role in determining the maximum loan amount that can be approved for an applicant. In general, the home loan eligibility criteria for salaried individuals are quite moderate compared to others.   

Eligibility Criteria For Salaried Individuals 

Salaried individuals are people who work for a government or a private company and get a fixed compensation at the end of each month. Any salaried individual can apply for a home loan upon fulfilment of the following eligibility criteria. 

• Age Of The Applicant: All salaried individuals need to be a least 21 years old to become eligible for a home loan. The individuals should also be less than 60 years old at the time of loan maturity. This eligibility criterion is similar for all types of home loan applicants. 
• Proof Of Employment: To be eligible for a home loan, salaried individuals need to provide proof of employment to the lenders. These may be in the form of offer/appointment letters, salary slips, and monthly income statements. Providing proof of employment assures the lenders that the loan applicants earn a steady income and hence are less likely to miss paying the EMIs.
• Years Of Employment: The salaried individuals should have worked for the same employer for at least three years when applying for the home loan. In case they have changed the job recently, they need to present documentary proof of having been under the employment of their previous employer for a minimum of three years. This helps assure the banks and financial institutions that the applicants are stably employed and can be trusted to repay the loan fully and on time. 
• Credit Score: A good credit score is a vital eligibility criterion for salaried employees seeking a home loan. In general, a credit score of more than 775 is considered great and makes it easier for applicants to get low-interest rates. A credit score between 700 and 775 is also good, but the interest rate for such loan applicants is slightly higher. Applicants with a credit score of less than 700 might find it difficult to get their loan approved. This is because the credit score reflects the creditworthiness and financial behaviour of the applicants. 
• Value Of The Property: The value of the property for which salaried individuals seek a home loan is another important eligibility criterion. In general, lenders seek a higher downpayment for more market-value properties. Most lenders seek a minimum of 10% downpayment for properties valued below 75 lakhs. The downpayment increases to 15% for properties valued between 75 and 80 lakhs and 25% for properties with more than 80 lakhs. However, the value amount and percentage may vary from lender to lender. 

Tips To Improve Home Loan Eligibility 

Even though most lenders strictly follow the home loan eligibility criteria, salaried individuals can enhance the same by following the tips given below. 

• Opt For A Joint Home Loan: One of the easiest ways for salaried employees to enhance their home loan eligibility criteria is by applying jointly with another salaried individual. The co-applicant should preferably be an immediate family member with a good credit score and a decent repayment capability.
• Clear All Pending Debts: Clearing pending debts helps in improving the credit score, which, in turn, enhances your creditworthiness. This has an overall positive impact on the eligibility criteria of salaried individuals as the lenders begin to consider them trustworthy enough. 
• Opt For A Longer Tenure: A longer repayment tenure means smaller EMIs that can be easily paid by salaried applicants. This assures the lenders that the applicants are willing to repay the loan even if it means paying more interest. 

Conclusion

The above information can help salaried individuals to increase their chances of home loan approval while fulfilling the eligibility criteria.