by Rajesh Mourya
Apply Home Loan
Introduction
Buying a home is a big step, and applying for a home loan is often the first move toward making that dream a reality. But before you approach a lender, it’s essential to know whether you meet the basic eligibility criteria. Lenders evaluate several factors to decide how much they can lend you and on what terms. This home loan eligibility checklist will help you understand what banks look for and how to improve your chances of loan approval.
1. Age of the Applicant
Most lenders prefer home loan applicants who are between 21 to 60 years of age if salaried, and up to 65 years if self-employed. This ensures enough working years are left to repay the loan.
Tip: Applying early in your career gives you longer repayment tenure and better EMI options.
2. Income and Profession
A stable and regular income is a major factor in determining your eligibility. Lenders usually require:
- Salaried individuals to have at least 2 years of work experience.
- Self-employed professionals to show 3 years of continuous business income.
Higher income generally means higher eligibility.
3. Credit Score
A credit score above 750 is considered good for home loan approval. It reflects your repayment history and creditworthiness.
Tip: Pay all EMIs and credit card dues on time to maintain a healthy credit score.
4. Employment Stability
If you’re salaried, lenders prefer applicants with a stable job history. Frequent job switches or gaps in employment can lower your credibility.
Tip: Try to stay with your current employer for at least a year before applying.
5. Existing Financial Obligations
Lenders consider your existing EMIs and credit card payments to determine your debt-to-income ratio. A high burden of debt may reduce your loan eligibility.
Tip: Clear off smaller loans or debts to improve your chances of approval.
6. Loan-to-Value (LTV) Ratio
The LTV ratio defines how much of the property’s cost the lender will finance. Most banks finance up to 75% to 90% of the property value. The rest must come from your savings.
Tip: Keep enough funds ready for the down payment and other charges like registration, stamp duty, etc.
7. Type and Location of Property
Lenders are more comfortable financing properties that are legally clear, approved by local authorities, and located in recognized areas. This helps secure the loan and resell value in case of default.
Tip: Always choose a property that meets the legal and technical checks set by banks.
8. Proper Documentation
Your home loan application should be supported with valid documents like:
- Identity proof
- Address proof
- Income documents (salary slips, ITRs, bank statements)
- Property documents
- Employment/business proof
Tip: Incomplete paperwork can delay your loan or lead to rejection.
9. Adding a Co-applicant
Adding a co-applicant like a spouse or parent can enhance your loan eligibility. Their income and credit history are also considered, which may help you qualify for a larger amount.
Tip: Both co-owners of the property should ideally be co-applicants on the loan.
Credit score
This is one of the prime factors that determines the eligibility and amount of loan that can be sanctioned by a bank. Try to improve your credit score before availing a home loan. This can be done by establishing a continuous track record of regular and timely credit card payments, and repayment of dues on other loans. You can purchase a credit report to check your score.
Down Payment
Some part of the cost needs to be funded by the home buyer. This contribution varies among banks and also depends upon the type of property, such as whether it’s an old house being resold or a new one.
Documents
Some of the documents that are required are proof of income, residence of the applicant, financial situation and verification of the property papers. Ensure that all property documents are available for review by the bank, so take the advice of a lawyer if you need to.
Pre-approved housing loan
Banks provide preapproved sanction of home loan based on income of the applicant, even before the property has been identified and finalised. A preapproved sanction will provide a ballpark estimate of the amount of loan that you are eligible for, which can help you to finalise a property based on your affordability.
Conclusion
Being well-prepared before applying for a home loan can save you from surprises and rejections. Use this checklist to evaluate your eligibility, strengthen your financial profile, and ensure you meet all the lender’s criteria. Remember, planning ahead is the key to a smooth home loan process and achieving your homeownership goals.