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Learn how Home Loan eligibility is calculated on your salary

How Home Loan  Eligibility is Calculated

For most salaried people to buy a home is to work toward a sense of well-being.  They often ask, “How easy is it to get a home loan? How is home loan eligibility calculated? If you are one among them who want to realize your dream of buying a home, you will learn how the eligibility for a home loan is calculated. The loan amount you are eligible for depends on various factors such as your present age, monthly income, financial obligations, credit score, employment status and credit history.

As a salaried person, it is essential to know the part of your salary considered for calculating the home loan eligibility, salary slabs, and eligibility amount.

Know your salary


Your salary is generally stated as a gross salary. A gross salary is the aggregate of:

  • Basic salary
  • Medical allowance
  • Leave travel allowance (LTA)
  • House rent allowance
  • Vehicle allowance, and
  • Other allowances

The above components put together is the cost to company (CTC), and it is not the one you take home. The net salary is what you take home, and it is calculated after the deduction of the amount towards employee provident fund, tax deduction at source and any other deductions based on the company policies. Your net salary is usually considered for the eligibility of a home loan.

How to calculate your home loan eligibility?


You are eligible for a home loan up to 60 times of your net salary or monthly income. For instance, if your net salary is Rs. 55,000, you will be eligible for a loan of approximately Rs 33 lakhs. The lending bank will exclude medical and leave travel allowances, for they are meant for specific purposes. IDFC First Bank uses a home loan eligibility calculator to arrive at the eligibility by taking into consideration your net monthly income and other factors.

The table given below gives you a quick reference of the eligible home loan amount on the common salary slabs. The amount given is arrived using the IDFC First Bank home loan eligibility calculator taking into consideration the following:

Existing EMIs: None

Tenure: 20 years

Rate of interest: 7% per annum

Number of household members: 3

Note: The earning member in a household is taken as one, and if there is more than one earning member, the net monthly income of two or more earning members can be joined to arrive at a higher eligibility amount.

Net Monthly Income (Rs.)

Home  Loan Amount (Rs.)

35,000

25,47,404

50,000

38,04,983

60,000

46,43,370

70,000

54,81,756

80,000

63,20,142

90,000

71,58,529

 

Other Factors that Affect Home Loan Eligibility


When it comes to calculating your eligibility for a home loan, several factors other than the net monthly income are also considered. They are:

  • Age: Though the salaried individuals between 21 and 60 are eligible for home loans, most banks and financial institutions take into account the age for calculating the amount of loan an applicant will be eligible for. If you are younger, you are eligible for a higher loan amount as you have a longer working life.
  • Employment: Your work experience and the company where you work are also considered for assessing your eligibility for a house loan amount. The reputation of the company and number of years you have been working there shows your stability in the job.
  • Credit score: Your payment history is one of the most essential factors considered by banks for determining your eligibility for a loan. Even if one earns a good salary, but has a poor credit score, it will have a negative impact on his or her chances of getting a loan.
  • Loan to value: Banks generally keep a buffer when funding; this is to recover the loan amount during the time of a default. Therefore, you will be sanctioned a home loan of up to 90 percent or less on the property even if you are eligible for a higher amount.

There are still more factors like your existing obligations and property’s technical and legal approval, which are used to calculate your eligibility for a home loan. To apply for a home loan with IDFC First Bank, click here.  

 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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