Criteria Lenders Use to Evaluate Home Loan Eligibility | Kotak Mahindra Bank - Home Loan Stories
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19 APRIL, 2022

Owning a home is a dream that almost every Indian harbours in their hearts. It's a matter of status, pride and accomplishment that makes them save funds for years. However, with the rising real estate prices, it's not always feasible to buy a house with savings alone. You need external financial support like a home loan. With a home loan, it is simpler to purchase a house property without exhausting your hard-earned savings. Moreover, you can comfortably repay the loan amount in tenures suiting your financial comfort.


However, to get a home loan, you must be eligible and have enough income to repay it. While determining home loan eligibility, lenders closely scrutinise your monthly income while processing your home loan application. They want to ensure that you earn enough to repay the loan without delays and defaults. But have you ever wondered how do the lenders evaluate the borrower's monthly income for a home loan? If yes, this article has all the answers.


What is the income requirement for a home loan?

To be eligible for a home loan, the following is the income requirement -

  • If you are a resident of metro cities Mumbai, Delhi, Pune, Chennai or Bangalore, you must earn a minimum income of Rs. 20,000.
  • If you are a resident of other cities in India, you must earn a minimum income of at least Rs. 15,000.


How is income evaluated for eligibility?

Lenders usually consider the salary of applicants while evaluating income. Gross salary or cost to company (CTC) of an applicant includes -

  • Basic salary
  • House rent allowance
  • Vehicle allowance
  • Medical allowance
  • Leave travel allowances, etc


However, this is the gross salary and not the take-home salary of the applicant. The take-home salary is calculated after deducting contributions for EPF, TDS and other deductions. The take-home salary is usually considered for determining the applicant’s eligibility.


For self-employed individuals, different lenders have varied requirements. However, most lenders require the applicant to have a monthly income between Rs. 25,000 – Rs. 40,000. Moreover, their home loan EMI should not exceed 50% of their monthly income.


Can you avail a home loan with a low monthly income?

It could be challenging to avail a home loan with a low monthly income unless you -


  • Take a joint home loan

Avail a joint home loan to enhance your eligibility. Lenders club the income of all the co-borrowers. Joint home loans can increase your income and help you get lower home loan interest rates and higher loan amounts. 


  • Declare additional sources

You can declare all additional sources in the application form to enhance your income. It could be income from rent, part-time jobs or investment returns.


In nutshell

You can get a home loan if you fulfil the income requirement of the lender. However, it's not a sure short guarantee for getting the best deal on a home loan. Apart from the monthly income, you must also fulfil other requirements like age, work profile, existing debts, credit score, etc. You must have a credit score above 750.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.