Loan Eligibility Calculator

What is Home Loan Eligibility Calculator

Before applying for a home loan, it is crucial to understand the eligibility criteria to avoid loan rejection that can impact your credit score. Home loan eligibility refers to the parameters based on which all banks and non-banking financial companies (NBFCs) evaluate the creditworthiness and repayment capability of the loan applicant. Therefore, having a clear idea about the criteria and fulfilling the same will make the process faster and effortless for you.

How is Home Loan Eligibility Calculated?

The home loan eligibility criteria may vary depending on the lending institution. A borrower can use the online home loan eligibility calculator that will compute the loan amount he or she is eligible to get. All that it takes is entering a few details like net income, loan amount, etc. Every lender considers certain factors for determining the eligibility of prospective borrowers.

Let us discuss some of these factors, as mentioned below:

• Age: Age is the topmost criterion banks or lenders consider when determining home loan eligibility. Most financial institutions limit the home loan tenure to an individual’s retirement age. Thus, older people may find it difficult to get a longer-tenure loan or may not be eligible if they are nearing retirement unless they have proof of regular income source.
• Credit Score: The credit score is another important factor based on which lenders assess the ability of the borrower to repay the loan. The CIBIL score is a three-digit number that is a summary of your credit history. It is advisable to check the minimum CIBIL score for a home loan since a poor credit score can lead to higher interest rates or loan rejection.
• Income Stability: The source of income and job stability for salaried individuals, for example, are taken into consideration by financial institutions when approving loan applications. Similarly, self-employed individuals can be eligible for a loan if they prove they have a steady income source.
• Property Details: The age and location of the property you have selected are among the crucial factors that lenders consider when approving a home loan. It is the security against which you avail of the loan. Moreover, the loan application would get rejected if the tenure is longer than the remaining years of the property. Hence, banks usually conduct a technical and legal investigation of the property before sanctioning the loan.
• Loan-to-Value (LTV): The loan-to-value ratio or LTV in home loan refers to the ratio of the loan amount to the appraised value of the property. It is one of the risk assessment tools or methods banks use to minimize the chances of defaults. Simply put, it is the percentage of the property value that a financial institution can lend to a home buyer.
• Debt-to-Income Ratio: Lenders and financial institutions consider the debt-to-income ratio, which is a measure of the prospective borrower’s repayment capacity. It is calculated as a percentage by dividing a person’s net monthly debt payments by the net monthly income.