Home loan eligibility and documents: what lenders look at

A lender decides your home loan eligibility by asking three questions: can you repay, will you repay, and is the home sound security if you do not? The answers come from your income and how steady it is, your age and working years left, the EMIs you already pay, your credit history, your employer or business, and the property itself. Your documents are the evidence for each one, so a complete, consistent file is the quickest route to a sanction.

What lenders assess

Each lender applies its own credit policy, so the same applicant can get different answers from different lenders. The RBI sets the ground rules: banks must assess every application properly and may not treat the property as a substitute for checking that you can repay, and lenders are expected to obtain your credit reports from one or more credit bureaus before deciding. The property also has to fit the RBI's loan-to-value caps, explained in our guide to how home loans work.

Income, and how steady it is

The lender wants income that is regular, documented and likely to continue. For a salaried applicant that means salary credits, the employer and how long you have worked there. For a self-employed applicant it means filed income tax returns and accounts over several years, and bank statements that tell the same story.

Age and the years left to repay

A home loan is repaid from future income, so the lender looks at how many working years you have left. Many lenders set an age by which the loan must be fully repaid, which shortens the tenure for older applicants and raises the EMI.

Existing EMIs and repayment capacity

Lenders compare your monthly commitments, including the new EMI, with your income, and each lender sets its own limit on how much of your income can go to EMIs. Car loans, personal loans and card dues all count, so clearing small loans before you apply can lift the amount you qualify for. How EMIs are calculated shows how tenure and rate move the EMI.

Credit history

Your record on loans and credit cards, as the credit bureaus hold it, shows how you have handled credit before. Check your reports before applying: each bureau gives you one free full report with your score every calendar year. Fix errors first, because a correction can take up to 30 days. CIBIL score and home loans explains scores, reports and disputes.

Your employer or business

Lenders weigh how stable the source of your income is: the employer's standing, or the age, trade and track record of your business.

The property

The home must pass the lender's legal and technical checks. Banks do not lend against property in an unauthorised colony that has not been regularised, or against a home meant for residential use that the applicant says will be used commercially, and they ask for a declaration that the building matches its sanctioned plan, checked by their own architect.

Co-applicants

Adding an earning co-applicant, often a spouse or close family member, lets the lender count a second income. Each co-applicant's credit history is checked, the loan appears in each person's credit report, and each is held liable for missed payments. Ask the lender who can join as a co-applicant and whether every co-owner of the property must also be a borrower.

Salaried and self-employed: what changes

NRI applicants in brief

Under the RBI's foreign exchange rules, banks and NHB-approved housing finance institutions can lend to non-resident Indians and persons of Indian origin to buy a home in India, on the same terms for amount, margin and repayment period as residents. EMIs have to be paid by remittance from abroad, from your NRE, FCNR(B) or NRO account, from the rent of that property, or by a relative in India paying into the loan account. Expect to show your passport, your visa or residence status, evidence of overseas employment and income, and statements for your NRE or NRO accounts. If you will not be in India for the paperwork, read power of attorney for NRI property owners early, and if you plan to let the home, see NRI property management.

The documents checklist

Lenders differ in the exact list, but most ask for documents in these groups.

For a resale flat in Bengaluru, the documents to check goes through each property paper in detail.

Preparing your file

1. Pull your credit reports and dispute any errors before you apply.
2. Pay down card balances and small loans you no longer need.
3. Make sure your name, date of birth and address match across your PAN, identity documents and bank records.
4. Keep your down payment in an account where its source is easy to show.
5. Ask the seller or builder for the property papers early, so the lender's lawyer is not kept waiting.
6. Apply to two or three lenders you have compared rather than many at once, because each lender's check adds an enquiry to your credit report.

Mistakes that delay sanction

• Incomplete or inconsistent documents, such as a name spelt differently on two of them.
• Existing loans left off the form that then appear in the credit report.
• A change of job while the application is being processed.
• A property with gaps in its title or missing approvals.
• Many applications in a short time.

If the answer is no

A bank or HFC that rejects your application must give you the main reasons in writing. Use them. If the problem was your credit report, check it and dispute any errors; if it was the property, ask exactly what was missing; if it was income, consider a co-applicant, a smaller loan or a larger down payment, and apply again once the gap is closed.

Frequently asked questions

Does the lender decide on the property or on me?

Both. The loan cannot exceed the RBI's loan-to-value cap for the property, and it cannot exceed the EMI your income can carry in the lender's judgement, so the lower of the two sets the ceiling.

Can rent from the flat I am buying count as income?

Treat it with caution. A let home can sit empty between tenants, so plan to pay the EMI from your own income, and ask each lender how, if at all, it counts expected rent.