Banks and other lenders have made the Home Loan application a very simple and easy process. But before applying for a Housing Loan, you should know certain things like whether you are eligible for it, the amount of loan you are eligible for and the process in which your eligibility is being calculated.

4 Basic Home Loan Eligibility Criteria

The very first step in Home Loan process is to find out whether you are eligible for it. In order to be eligible for availing a House Loan, you should satisfy the following criteria:

1. Age- You should be able to fulfill the age requirements i.e. your age should be between the range of minimum age and maximum age required.

2. Earning Stability – You should be either a self-employed individual/professional or a salaried employee. In other words, you should be an earning individual.

3. Financial Consistency – You should have a convincing economic status. A good and stable financial record is another eligibility criterion for getting a Home Loan.

4. Credit Score – You should have a good Credit Score (750+ is an ideal score) for availing a loan with flexibility in interest rate, EMI, and loan amount.

Calculation of Home Loan Eligibility

Different Home Loan providers have different eligibility criteria.

To find out the amount of Home Loan you are eligible for, you can use Home Loan eligibility calculator available online on the websites of different lenders.

Eligibility calculator calculates your eligibility on Housing Loan interest and tenor and gives you an approximate amount that you can avail as a House Loan. Banks often exclude certain allowances from your salary while calculating your net income. So you should be aware of the calculation process followed by your loan provider.

Calculation of Home Loan EMI

Once you know the amount of loan you are eligible for, you should calculate your Home Loan EMI.

EMI or Equated Monthly Instalment is the instalment that you pay to the lender every month till the repayment of your loan. You can use Housing Loan EMI calculator available online on different websites to calculate your EMI.

EMI calculators are very popular nowadays. They can be used easily for different loan amounts, loan tenor, and interest rates.

You can also calculate your EMI by using a mathematical formula which is-

EMI = [ P x R x (1+R)^N] / [(1+R)^N-1],

where P stands for the loan amount or principal, R is the interest rate per month and N is the number of monthly installments.

EMI calculation not only gives you the amount to you have to pay monthly as installment but also helps you in planning your financial budget.

The Bottom Line

Home Loan eligibility is the first step in availing a Home Loan. So you should compare the eligibility calculation process of different banks and Home Loan providers before arriving at any decision.

Author's Bio: 

Arwind Sharma is a financial advisor with an experience of more than 7 years. He has worked for topmost financial firms in India and has been a visiting faculty at many reputed institutes in India. Currently based in Gurgaon, Arwind Sharma is a name to reckon with when it comes to financial management for big brands. A post-graduate in business economics, he is an alumni of Princeton University, USA. During his free time, Arwind teaches children from marginalised sections of society and also work on his blog.