How much Home Loan can I get on my salary and what are the other eligibility factors?

Anyone can apply for a home loan, but the home loan amount sanctioned by lenders is different for every borrower
 

In India, many individuals finance the purchase of their new home or a piece of land via a home loan. People also apply for home loans to finance the renovation or extension of their homes. For salaried employees, however, being eligible for a home loan depends on their monthly net salary. We look at the effect that a borrower's net monthly salary has on their home loan eligibility, including other factors that affect a person's ability to take a home loan.

How does one's salary affect their Home Loan eligibility?
 

Lenders grant a home loan to salaried employees based on their monthly salary. A home loan request by a salaried employee is sanctioned and approved when lenders are assured about the borrower's ability to repay the loan promptly in the future.

Any salaried employee's salary consists of two major parts – their basic salary and allowances. The allowances include.

• A medical allowance
• A house rent allowance (HRA)
• A leave travel allowance (LTA)
• Other allowances

Factors that affect Home Loan eligibility
 

Apart from the borrower's in-hand salary, other factors also affect their eligibility for a home loan. These factors are listed below.

The borrower's age
 

Lenders generally expect borrowers to complete their home loan repayment by the time they attain the age of 70 years. Lenders prefer granting home loans to the younger population since they have a longer working life.

Employer and work experience
 

If the borrower is a salaried employee working at a reputed company, they are more likely to get a home loan. A stable job implies that the borrower can repay the loan timely via EMIs (equated monthly instalments). Lenders also consider the borrower's work experience before granting a home loan. Substantial work experience indicates a stable job and a better capability to repay the home loan.

Credit score
 

Lenders consider a borrower's credit score while sanctioning their home loan request. A credit score is a three-digit number between 300 and 900, representing an individual's creditworthiness. The closer an individual's credit score is to 900, the higher their creditworthiness.

Fixed Obligation to Income Ratio (FOIR)
 

Lenders consider a borrower eligible for a home loan only after factoring in their existing loan repayments and outstanding dues. It includes any car loan, consumer durable loan, personal loan, or credit card. If the borrower is overburdened with debt, their FOIR exceeds 50%. A borrower's FOIR must be less than 50% to qualify for a home loan.

Loan to value ratio
 

It is important to note that a home loan does not fund the entire cost of the property. Lenders approve funds up to 90% of the total cost of the property so that they can liquidate the underlying asset and recover their amount in the event of a default.

Legal and technical approval
 

Lenders conduct two major property assessments before sanctioning a home loan. The first assessment is the legal assessment, which examines the legal chain of the property to establish a clear title and ownership. Technical approval, on the other hand, determines the property's market value.

How much home loan can I get on my salary?
 

Before applying for a home loan, it is advisable to consult a home loan eligibility calculator to know if your net monthly salary can help you get a home loan. IDFC FIRST Bank's online home loan  calculator helps borrowers assess their eligibility.

The details you need to input into the calculator are – your net monthly salary post-tax, the rate of interest, your monthly obligation (in lakhs), and the home loan tenure. Once you input these details, the home loan calculator tells you the home loan amount you will receive.

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.