Tips to check your home loan eligibility with co-applicant, existing loan and credit score

There are several home loan eligibility calculators on the Internet that may help you find out the amount of loan that you can get.

Home loan interest rates across most banks and NBFCs are currently low and even the prices of residential properties are not moving up in a hurry. But, homebuyers may have to expedite their buying decision. In the post-Covid-19 world, home prices may firm up, especially of those which are based in locations where the demand is high. Several homebuyers are already firming up their home-buying plans and looking to take advantage of the current low-interest-rate scenario.

If you are one of those who are looking to take a home loan, you need to approach a bank or an NBFC. The lender will calculate the home loan eligibility amount that can be sanctioned to you. The home loan eligibility will determine how much loan can be had from the bank. There are several home loan eligibility calculators on the Internet that may help you find out the amount of loan that you can get.

Primarily, home loan eligibility is based on one’s income and repayment capacity. Other factors such as your spouse’s age, interest rate, credit score, existing loans, and the tenure of the home loan also matter.

Your other loans if any such as car loan or personal loan also impacts your home loan eligibility. While taking a home loan, the lender will ask you about your existing liabilities including personal loan or car loan EMIs. Banks generally do no lend an amount on which the EMI will be more than 45-50 per cent of your monthly take-home pay.

How much home loan can you get on Rs 40000 salary? Assuming someone working in a private firm has a monthly income of Rs 40,000 but his take-home net pay pay is Rs 34,000. Then, the new loan will be for an amount on which the EMI cannot exceed approximately Rs 17,000 i.e. 50 per cent of net pay. An EMI of Rs 17,000 at an assumed interest of 8 per cent for 15 years can provide a home loan of about Rs 18 lakh.

It’s better to take a loan where the home loan EMI is not more than 35 per cent of your monthly income while total EMI including car loan etc should be restricted to 50 per cent. If there is no other loan, you may go up to 50 per cent with a home loan. This will give you the opportunity to save for long-term goals as well. You can add spouse income to enhance home loan eligibility as well.

As the loan repayment through EMI’s has to be serviced throughout the loan term, typically most banks keep tenure such that the loan ends by the time the EMI payer reaches age 65.

Your Credit history and credit score show your past repayment track record and also help lenders to decide on your home loan eligibility. All lenders will anyhow look at the borrower’s credit profile before disbursing the loan. However, when they do so it is more to assess the risk and not much with the home loan eligibility. Still, few banks do offer a lower interest rate to borrowers with higher Credit Score.

But, if you are falling short of the required amount of loan, here are three home loan tips to enhance your eligibility:

Increase home loan tenure

By increasing the tenure of the loan, one can increase the home loan eligibility. In the example above, at the same interest rate, if one agrees to increase the tenure of the loan from 15 to 20 years, the EMI stays at about Rs 17,000 but the home loan eligibility increases to Rs 21 lakh. Similarly, at same rate of interest, the loan amount increases to Rs 22.5 lakh for a loan tenure of 25 years. A word of caution: Increasing the tenure, increasing the interest burden if one keeps the loan running till the end of tenure. Therefore, always have a back-up plan to repay the loan as early as possible and not run it till its original tenure.

Add co-applicant

One can add a co-applicant to the home loan thus increasing the eligibility amount of the loan. A co-applicant can be his spouse, siblings or even the parents if they too are earning members of the family.

Scout for low-interest rate

Banks and HFCs are providing loans at a varying interest rate and the differential is sizeable among them. Choose a lender that gives you the home loan at the lowest rate of interest. A difference of even 1 per cent can increase eligibility by a lakh.

Finally, by scouting for an effective lower rate of interest, adding a co-applicant and by increasing the tenure of the loan, you may increase your home loan eligibility. Be prepared with these before you walk into the lender’s office for a better home loan deal.

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