If you are a salaried employee planning to buy your dream home, you must understand the eligibility criteria to ensure you qualify for a home loan. Lenders use various parameters to assess the creditworthiness of salaried employees and determine their eligibility for a home loan. This article provides details about eligibility details of Home loans for Salary class employees.
Also Read: How to reduce your home loan EMI?
What is the Eligibility Criteria for Salaried Employees for Home Loans?
Here are some common eligibility criteria that salaried employees need to meet when applying for a home loan:
One of the useful tools that can help you estimate your eligibility is a home loan eligibility calculator, which considers your income, expenses, and other factors to estimate the loan amount you may be eligible for. Here are the eligibility criteria for salaried employees.
Your age is important in determining your home loan eligibility. Most lenders require borrowers to be between 21 to 60 or 65 years old at loan maturity.
However, the age requirements may vary from one lender to another, so it’s essential to check with your chosen lender.
Your income is the factor lenders consider when evaluating your mortgage eligibility. In general, lenders prefer applicants with a stable and regular source of income.
You must provide proof of your income, such as salary slips, bank statements and income tax returns (ITR) for the last few years, to show that your income is stable.
3) Employment History:
Lenders also consider your employment history when determining your home loan eligibility. Lenders select borrowers with a steady employment history minimum of 2-3 years of work experience.
4) Credit Score:
Your credit score is an important parameter that lenders use to assess your creditworthiness. A good credit score indicates that you have a good repayment history and are less likely to default on your home loan.
Most lenders select applicants with a 750 or above credit score to approve a home loan. However, the credit score requirement may vary from lender to lender, so it’s crucial to check with your chosen lender.
5) Loan Amount and EMI:
The loan amount and Equated Monthly Instalments (EMI) you are eligible for will depend on your income and other financial obligations.
Lenders usually follow the rule that the EMI of all your loans, including the home loan, should not exceed 40-50% of your net monthly income.
6) Property Value:
Lenders also consider the property value you plan to purchase when determining your home loan eligibility. Generally, lenders finance up to 80-90% of the property value, and the borrower needs to arrange the remaining amount as a down payment.
Tax Benefits on Home Loans for Salaried Employees
Apart from the eligibility criteria, salaried employees can also enjoy tax benefits on home loans, which can help reduce their overall tax outgo. Here are some of the tax benefits on home loans for salaried employees:
1) Interest On Home Loans Is Deductible:
You can claim up to Rs. 2 lakhs per annum on your home loan interest under Section 24(b) of the Income Tax Act, 1961, on a self-occupied property. In the case of unowned or leased real estate, the entire amount of interest can be claimed as a deduction without an upper limit.
Also Read: Should I prepay home loan or start SIP?
2) Deduction On Home Loan Principal Repayment:
You can claim a deduction of up to Rs. 1.5 lakh per annum on the principal repayment of your home loan under Section 80C of the Income Tax Act, 1961, subject to the overall limit of Rs. 1.5 lakh for various other investments and expenses eligible for deduction under this section.
3) Joint Home Loan Benefits:
If you have taken a joint home loan with a co-applicant, you and the co-applicant can claim separate deductions on the interest and principal repayment. This can be based on the proportion of each person’s loan amount repaid, subject to the overall limits mentioned above.
Understanding the eligibility criteria and tax benefits before applying for a home loan is essential to ensure a smooth approval process and optimize the tax benefits.
Additionally, salaried employees can also enjoy tax benefits on home loans, such as deductions on home loan interest and principal repayment and additional deductions for first-time homebuyers.