It is one thing to dream of owning a home and quite another to actually buy one, since there are liabilities attached to it, especially if you are taking a home loan. It means committing a part of your monthly salary to repay the loan over several years. Once you decide that you can afford a loan, you have to look at other aspects, such as the loan amount you are eligible for, the customer service efficiency of the financial institution, and fixed or floating home rate options.
What is Home Loan Eligibility?
Home Loan eligibility is the maximum amount of loan that you can hope to get based on your current income and repayment capacity. This also takes into account on size of the loan, tenure, and interest rate. Financial institutions generally advise to limit the EMI to up to 60 percent of the total take-home pay, assuming that there are no other ongoing liabilities. This helps the buyer to have enough disposal income for his or her monthly expenses.
Eligibility is also determined by other factors such as age, prior loans, credit history, repayment track record, existing loan obligations, and retirement age.
Must Read: How To Get A Home Loan Approved Instantly?
3 Best Ways to Increase your Home Loan Eligibility
1. Applying Jointly
Eligibility improves substantially if you apply for a joint home loan with immediate family members who are earning, such as a spouse, son, or daughter. This is because a joint applicant’s income is taken into account while determining eligibility.
2. Closing Other Loans
If you have other loans, you may consider closing the short-term ones through pre-payment, so that you are eligible for a higher home loan. Since buying a home is a one-time transaction, it makes sense not to compromise for want of desired loan amount. Also, you can go for a longer loan tenure, say up to 25 years, to increase the eligibility and make prepayments as and when surplus funds are available.
3. Clear Your Dues for a Higher Credit Score
Also, if you have any pending payments or defaults which may have impacted your credit score adversely, it is strictly advisable to clear those and then apply for a home loan. Credit score plays a critical role in gauging the repayment capacity and prudence of payment by the buyer.
Thus, while eligibility is an important factor in a home loan, you need not let it prevent you from buying a bigger and better home for your family.
Author : Shaji Varghese
(The author is Executive Director and Business Head, PNB Housing Finance Ltd)
