Minimum Salary For Home Loan

Buying a home is every individual’s dream. With property prices on the rise in India, it becomes even more important for everyone to own a house. 

For most salaried individuals, a home loan is the only way to afford this valuable asset. Lenders in India often offer a variety of home loan options to meet the different needs of individuals, but the most important thing they consider is your monthly income. 

In this blog, we will understand the basics of the minimum salary requirement for home loan eligibility and what you can do if you're falling short.

Why Does Monthly Income Matter For Home Loans?

Usually, lenders look at various factors when they decide whether to approve a home loan. And one of the key factors they consider among others, is your monthly income. They want to make sure that you can comfortably repay the loan along with all your other expenses. Ideally, the higher your income, the better your chances of getting your home loan approved, because it clearly suggests you have a good capacity to repay the loan.

What Do Lenders Look For In Analysing The Monthly Income of Salaried Home Loan Applicants?

The salary of employees is usually stated as their gross salary. The total gross salary is the sum of the following: basic salary, leave travel allowance (LTA), medical allowance, vehicle allowance, house rent allowance (HRA), and other allowances based on the policies of the employer.

All these together makeup what's called the cost to the company (CTC). This, however, does not represent the employee's take-home salary. The employee takes a net salary at home, which is calculated after deducting the amount towards EPF contribution, TDS, and other deductions as per the company policies.

So, while approving a home loan, the lenders look at the take-home or net salary rather than the gross salary or CTC.

What's the Minimum Take-Home Salary Required for Home Loans?

The minimum take-home salary required for a home loan varies from lender to lender. Generally, though, most lenders look for a monthly income between Rs. 25,000 and Rs. 40,000. It's also a good rule of thumb that your Equated Monthly Installment (EMI)should not exceed 50% of your monthly income. This makes it more probable that you will be able to pay back the loan on time and fulfil your other financial obligations as well.

Other Factors That Affect Home Loan Eligibility

There are a few other important factors apart from your salary income, that lenders also consider:

• Employment History: Sometimes continuous switching is also not good. And if you have a stable job history, it can increase your chances of easily getting a home loan.

• Employer Reputation: Working for a well-known company can sometimes work in your favour. And it can help you get your home loan approved faster.

• Existing Loans: If you already have other loans, this could affect your ability to take on a new one. Lenders do check how many existing loans you have.

How Can One Check Eligibility For A Home Loan?

Most banks and financial institutions have their own online calculators available on their websites that let you check your eligibility for a home loan. These calculators can give you a good idea of the eligibility amount and EMIs based on your income and other factors.

Tips to Improve Your Home Loan Eligibility

• Maintain a Good Credit Score: Your credit score is one of the key factors in assessing your eligibility for a home loan. Therefore, it is always advisable to pay your bills on time, don't default on loans, and keep your credit card balances as low as possible. This will help you maintain good credit score.

• Increase Your Income: When determining your loan eligibility, every financial institution takes your income into account. And you become a more viable borrower when your income is higher, as that increases your repayment capacity. To increase your income, you can consider getting a higher-paying job, freelancing, or starting a side business.

• Reduce Existing Debt: When determining an applicant's eligibility for a home loan, banking institutions consider the debt-to-income ratio. As a result, it makes sense for a candidate to pay off any debt because doing so will make them more eligible for a home loan.

• Add a Co-Applicant: By adding a family member who earns an income and has a strong credit score as a co-applicant, you can improve your eligibility for a home loan. By doing this, you'll also be able to borrow more money because your EMI will become more affordable. 

• Select a longer loan tenure: Your eligibility for a home loan may be increased by selecting a longer repayment period because you will have a lower EMI, which means that you are more likely to make timely payments. Your eligibility for the home loan is improved in the process, and to the lender, it will appear as a lesser-risk loan to you.

Frequently Asked Questions (FAQs)

What Is The Minimum Salary Required For A Home Loan?

The minimum salary required varies by lender but is generally between Rs. 25,000 and Rs. 40,000 per month. The actual amount depends on several factors, including the loan amount and your other financial obligations.

Is It Possible To Get A Home Loan With A Co-Applicant?

Yes, applying with a co-applicant, such as a spouse or family member, can improve your chances of getting a home loan. The combined income of both applicants can make you eligible for a higher loan amount. Additionally, if the co-applicant has a good credit score, it can positively influence the lender's decision.

How Does Choosing A Longer Loan Tenure Affect Eligibility? 

Opting for a longer loan tenure can lower your monthly EMI payments, making the loan more manageable. However, it also means you'll pay more in interest over the life of the loan. It's a balancing act—choose a tenure that works for you financially.

Well, buying a home is a big decision, and understanding your loan eligibility can make the process smoother for you. Keep these tips in mind, and you'll be one step closer to finding the perfect home loan for your needs.