Your income and expenditures influence credit eligibility. When you apply for a home loan, lenders will consider a combination of factors to assess whether you qualify for credit and the lending risks involved. Among these, salary is a significant indicator as it denotes how quickly one may be able to repay the loan.
Every loan applicant has to meet certain eligibility standards if they wish to receive loan approvals. Lenders are stringent about these criteria since it helps them establish an individual’s credit behaviour and ability to manage the proposed loan. Failure to fulfil these requirements can result in loan rejection. All lending institutions have specific eligibility conditions in addition to a minimum income requirement.
Here’s a quick look at how lenders calculate eligibility for a housing loan and how much money individuals may avail based on income.
Home Loan Eligibility Criteria
Lenders normally appraise loan eligibility on several considerations such as age, salary, credit score, location, job profile, and other financial commitments. The most common criteria include the use of a housing loan eligibility calculator, which helps borrowers determine the loan amount they are eligible for by evaluating their income, credit score, existing liabilities, and other financial details. This calculator simplifies the process by providing an estimate of the loan amount and terms based on these factors
- Applicants must be resident Indian nationals
- They should be between 23 years to 65 years (for salaried persons) and 23 years to 75 years (for self-employed individuals)
- They must maintain high credit scores of 750 or above
- Salaried employees should have work experience of at least three years; while self-employed persons need business continuity of over five years
- They should show consistent earnings, preferably over Rs. 25,000 per month
How Your Salary Affects Home Loan Eligibility
There is a certain degree of risk in lending large sums of money since a house loan demands a hefty financial commitment. This is why lenders emphasise your wages when considering loan approvals and the maximum eligible amount. Generally, this sum may be five to six times your yearly salary, although the interest rate might vary in each instance. The home loan eligibility for salaried person is particularly important, as it helps lenders determine the loan amount based on the stability and level of income, along with other financial factors.
Lenders look at your net monthly income when evaluating loan repayment ability and the maximum loan amount. The table below demonstrates the correlation between the net monthly income and the probable loan amount you could qualify for:
Monthly Income |
Loan Amount |
| Rs. 25,000 | Rs. 18 lakh |
| Rs. 35,000 | Rs. 25.20 lakh |
| Rs. 60,000 | Rs. 43.20 lakh |
| Rs. 80,000 | Rs. 57.60 lakh |
How Much Loan Can I Get
The multiplier approach or the EMI/NMI ratio is used to determine how much loan you may receive according to your earnings. Lenders finalise the loan amount by taking into account both your ongoing EMIs (Equated Monthly Instalments) and your NMI (Net Monthly Income).
Generally, anyone with an EMI/NMI ratio under 60% can secure a house loan. Nonetheless, lenders have the authority to raise or lower interest rates based on this percentage. You have higher chances of obtaining a bigger loan amount at reasonable rates with a smaller EMI/NMI ratio. Lenders use the multiplier approach to decide the maximum loan amount. This involves multiplying your NMI by a factor between 60 to 72, or your yearly income by a factor of 5 or 6.
Let’s use the example below to understand this better:
If you receive a net monthly salary of Rs. 50,000, you can expect the following calculation to arrive at a suitable housing loan amount:
50,000 x 72 = Rs. 36 lakh
Therefore, on a monthly income of Rs. 50,000, lenders may extend loans up to a maximum of Rs. 36 lakh.
If you have a joint home loan, this sum may increase due to the combined income of two earning members. Besides, when evaluating the actual quantum of loans, several additional costs are also taken into account, including operational expenditures and associated fees, which may impact the final loan amount that lenders might agree to sanction.
Ways to Raise Your Eligibility
The points listed below can increase your eligibility for obtaining a home loan:
- Improve your CIBIL score and credit record
- Pay off existing loans and other credit
- Choose a joint home loan
Summing Up
Although most eligibility requirements remain the same, a few criteria may vary among lenders. When trying to understand if you qualify for a loan, it is best to make use of a housing loan eligibility calculator. It requires simple inputs such as your date of birth, location, monthly income, preferred tenor and details of other existing debts. You may adjust these figures to check the maximum eligibility amount.
Additionally, you can also access an online EMI calculator to review the EMI outgo. Based on this data, it becomes easier to estimate loan affordability and then apply for a home loan as per your needs.
