What are the eligibility conditions for a home loan?

Home Loans are generally given to three categories of individuals by banks - salaried individuals, self employed professionals and self employed non professionals. The eligibility conditions vary for these three categories in most banks. The repayment capacity and eligibility of the borrower is determined based on several factors like age, tenure of loan, income, employment type and status, spouse's income, stability and continuity of occupation etc.

Let’s look at the main eligibility conditions:

Age of Borrower: Banks prescribe a minimum and maximum age of the borrower. The minimum age is usually 21 years of age. The age of the co-applicant is also specified by banks. The maximum age is given in terms of the age of the borrower at the time the loan ends. So while ICICI specifies this to be 65 years of age or retirement age, Axis Bank is more stringent for salaried borrowers at 60 years on loan maturity. Self employed individuals and professionals in Axis Bank have the maximum age at loan expiry criteria to be 65 years. Some banks like HSBC give different age limits for salaried individuals in private companies, government companies and self employed individuals.

Employment: Generally, all borrowers are expected to be either salaried with private or government companies, self employed professionals or self employed non professionals. As a home loan is a large liability, banks would want to make sure of the stability and continuity of employment while granting the loan. It is for this reason that in some cases, the eligible loan amount is lower, as the job may be viewed to be more risky compared to others.

Income criteria: Banks determine eligibility criteria based on the income of the individual. Although many public sector and private sector banks do not specify this amount in black and white, some banks like HSBC do so. For example, HSBC has minimum net income criteria of Rs. 5 lakhs per annum for salaried borrowers and Rs. 7.5 lakhs per annum for self employed borrowers. Some banks look at income on gross basis, while others consider the net take home salary for determining eligibility.

Spouse’s income: Most often, borrowers take a joint home loan along with the spouse to enhance loan eligibility. Banks also suggest this option. In this case, both the applicants’ incomes are considered. As the income base is increased, the repayment capacity is higher and therefore the amount of loan you are eligible to borrow increases.

Other loan commitments: When you borrow a home loan, the repayment capacity is of paramount concern for the bank. Therefore, the loan eligibility is worked out by calculating backwards on the Equated Monthly Installment (EMI) amount. This is compared with your monthly outflows, most important of which are payment of other loan commitments like car loan, education loan, etc. and the ability to pay is determined. This is a major determinant of the loan eligibility.

Other factors: Banks have internal stipulations on minimum and maximum loan amount, maximum tenure etc. Although these do not determine your eligibility directly, they have an indirect effect. For instance, the tenure you choose will determine your EMI, which in turn will be checked to determine the repayment capacity and hence the eligible loan amount.

BankBazaar.com online eligibility calculator can be used to check the eligibility for a home loan. This calculator would ask for details such as the monthly income, current loan obligations, loan tenure, interest rate, age of borrower and employment type, based on which the borrower’s loan eligibility is calculated and given instantly.