Eligibility for Home Loan

For determining home loans eligibility one needs tounderstand this with the table:
understand the calculations involved in it. AsMonthly Income (Rs)
calculations are rarely explained in a simple form, it25,000
can be hard for a layman to understand them.Income available for EMI payments (i.e. 55% of
With the view to explain easily, following is anRs 25,000) or disposable income 13,750
illustration for the determination of home loanRate of Interest (%) 8.00
eligibility and the reasons for the same.Tenure (Yrs) 20
Easy Monthly Installments i.e. EMI Payments areEMI per lakh (Rs) 836
calculated on the basis of monthly income of theHome loan Eligibility (Rs) 1,664,000
individual. Housing Financial Companies (HFCs)In the above table rate of interest is 8%, tenure
consider different percentage of monthly incomeis 20 yrs and EMI per lakh is 836. For calculating
for EMI payments for different monthly salaryhome loan eligibility the disposable income (i.e.
slab. The following table shows how theRs13,750) is divided by EMI per lakh (i.e. Rs 836),
percentage of monthly salary that is consideredwhich works out to be Rs 1,664,000.
for EMI payments depends on the net monthlyThis is the fundamental nature of calculating home
salary.loan eligibility but some HFCs have different
Net Monthly Salarymethod of calculations. Like they may consider
% of salary (monthly) factored in determining EMIgross salary instead of net salary for calculations.
paymentsAlso for determining income available, they may
Between Rs. 8,001 - 9,999have different percentage structure from that of
45%table shown above. In case of self-employed
10,000 - 19,999 50%persons different method of calculations are
20,000 - 34,999 55%adopted.
35,000 and greater 60%Some intangible factors are also considered for
As per the table if an individual is earning 25,000the eligibility, they are: -
monthly salary, 55% of his salary will be• Profession of the individual: HFCs have
considered for EMI payments. The amounta list of professions, which are negative or black
calculated is (55% of 25,000) is equal to Rslisted. Though the list is not official but any
13,750, which is also known as disposable income.individual from these professions face lots of
And if another individual is drawing salary of Rsdifficulties in getting a loan.
45,000 per month. In his case, Rs. 27,000 will be• Property's Location: Like negative
considered for EMI payments i.e. 60% of hisprofession there is a list of negative area for
salary. It means that percentage of salarywhich loan can't be granted. For the loan the
considered for EMI payments rises with theproperty has to be within geographical area
increase in salary and vice versa.defined by HFCs.
All HFCs lists in EMI table monthly EMI per lakh for• Individual Personal Details: These details
varying tenures and interest rates, which isinclude individual's financial status, his credit
different for every HFC. The eligibility for homerepayments history, saving habits etc. for deciding
loans is determined by EMI per lakh and individualhome loan eligibility.
income available for making EMI payments. Lets