Securing a Housing Loan is the most common and accessible way for individuals to realise the dream of owning a home. However, before a non-banking financial company or lending institution approves a Home Loan, several factors must be evaluated to determine an applicant's eligibility.

Understanding these parameters can help prospective borrowers prepare better and avoid rejection. Let's explain the various factors that NBFCs consider when assessing Home Loan eligibility:

What is Home Loan eligibility?

Home Loan eligibility is the amount a borrower can qualify for from a lender based on specific criteria. Each NBFC may have policies, but the foundational evaluation process remains similar across the board. Eligibility is crucial in determining Home Loan approval, as well as the maximum sanctioned amount, applicable interest rate, loan tenure, and EMI structure.

Key factors NBFCs consider when determining Home Loan Eligibility

Income and employment

Your monthly income is the most vital parameter. A higher and more stable income typically results in higher Loan eligibility. NBFCs assess whether you are a salaried or self-employed individual. You should be employed as a salaried individual at a private limited company, a partnership or a proprietorship. Self-employed individuals, such as doctors, architects, and those with unlisted companies or partnership firms, are eligible for home loans.

CIBIL score

One of the most decisive factors is your CIBIL score, which reflects your financial discipline. A score above 700 is generally considered favourable. NBFCs review your timely payment history, active Credit Account number, and credit utilisation ratio.

Age of the applicant

Most institutions offer Housing Loans to individuals who are 21 years old at the time of the Loan application. Moreover, the applicants should not be older than 65 years at the time of Loan maturity.

Loan tenure

Longer tenure generally means lower EMIs, which can increase eligibility for a Home Loan. However, longer repayment periods also result in higher interest payments over the Loan's lifetime. NBFCs usually allow borrowers to select tenures of up to 30 years, depending on age and income.

How to improve Home Loan eligibility?

• Try applying for a Home Loan with a co-applicant.
• Apply for a longer tenure that leads to lower EMIs.
• Clear existing debts to improve debt-to-income ratio. Fulfil all your financial liabilities before applying for the Home Loan.
• Maintain a good credit score of 700 or more.
• Mention all your rental income sources to improve your debt-to-income ratio.

How do you check Home Loan eligibility online?

You can check your Home Loan eligibility from your home. Open the Home Loan calculator available on your lender's website and input details such as:

• Monthly income
• Net monthly obligations
• The market value of the property
• Interest rate and Loan tenure

Conclusion

Understanding the key parameters NBFCs consider for Housing Loan eligibility can dramatically improve your loan experience. Factors such as income, existing liabilities, credit score, and even the location of your property all play a role in determining whether your application is approved and how much you can borrow.