Owning a home is dream for many, but, there are chances of rejection of your home loan application if you fail to fulfill certain conditions.
There are certain conditions such as how much loan you can avail which is based on your income, repaying capacity and loan amount.
5 points that are considered for home loan eligibility
- An individual is eligible for a loan up to 60 times on his net income per month.
- Bank will also consider if you have any other loans and EMIs which are running and net savings after all the deductions.
- There can be difficulty in availing loan if you have bad credit score or if you have defaulted some major payments.
- Individual can increase the eligibility for loan by opting for longer tenure loans.
- Eligibility can also differ for salaried individual and self employed.
Banks usually consider around 40 per cent of an individual's income as living expenses. So if a person earns Rs 60,000 each month and spends Rs 25,000 as living expenses and Rs 20,000 on other EMI such as car loan, your eligibility will be considered on the remaining Rs 15,000.
Home loan eligibility = Monthly savings/equated monthly installment (EMI) per lakh x 1 lakh
Say for home loan of Rs1 lakh taken for 20 years with 10 per cent interest rate, the EMI will be around Rs 965.
If formula is applied, the eligibility would be 15,000/965 x Rs 1 lakh= Rs 15.54 lakh. Before going in for a home loan its best to check a host of things like the processing fee charges, interest rates, time for disbursal etc. Please note that all these things differ from housing financial institutions and banks.
Banks usually consider that an individual will be able to afford around 40-50 per cent of their income on their home loan.
Any delay in payment attracts a hefty interest rate and this can go to as high as 24 per cent per annum.
What are the documents required for home loan for salaried individuals:
* Application form with a photograph, which should be signed by all of the applicants.
* Salary-slips for the last three months. This may again differ from bank to bank, some of whom may ask you for six months salary statement.
* Form 16 and/or income tax returns are necessary to satisfy the lender.
* Banks and housing finance institutions would require a six months bank statement or more.
* Identity, age and residence proof.
* Processing fee/cheque.
Why you should opt for a home loan?
The tax saving benefits in a home loan are immense. You can get Rs 1.2 lakhs as tax benefit on the principal amount paid on the home loan. Apart from this, there is an amount of Rs 2 lakhs, that can be availed for interest on home loans paid.
Thus, it is a great tax saving way. Hence, if you are in the taxable bracket, it makes sense to avail a home loan. Also, these days interest rates are falling, which can be advantageous for home loan borrowers. As mentioned earlier, you need to check your eliibility before taking a home loan in India.