Home loan eligibility for Resident Indians depends upon the repayment capacity of the loan applicant. The maximum loan that can be sanctioned varies with the banks and other housing finance companies (HFC) and generally, the maximum loan amount granted is 80 to 85% of the cost of your home.

Home loan eligibility corresponding to repayment option is based on the following factors. Even though, the eligibility criteria may vary according to the HFCs regulations.

As home loan rates increase, the loan eligibility for a borrower becomes stiffer. In such a scenario, some home loan borrowers might have to re-evaluate their options (in terms of loan amount) on account of the new eligibility criteria. Home loan eligibility can be enhanced by:

i) Increasing the Home loan tenure
One of the basic process of enhancing the home loan eligibility is by opting for a higher tenure. This is so because the EMI, which an individual has to pay, starts to decline as the tenure increases while the interest rate as well as the principal amount remains the same. What changes though, is the net interest outgo, which rises with a rise in tenure. And since the individual is paying a lower EMI now, his 'ability to pay' and therefore his loan eligibility automatically increase.

ii) Repaying other outstanding loans
There might be adverse effect on home loan eligibility for individuals with outstanding loans like car loans or personal loans. Industry standards suggest that existing loans with over 12 unpaid installments are taken into account while computing the home loan borrower's eligibility. In such a scenario, individuals have the option of prepaying in part/full their existing loans. This will ensure that their eligibility for the home loan purpose is unaffected.

iii) Clubbing of incomes
Home loan eligibility can also be enhanced by clubbing incomes of spouse, children (son or daughter) staying with the applicant and having regular income and even earning parents (father or mother) living with the applicant. The eligibility in such cases, will be calculated on the clubbed income of both the applicants enhancing the individual's eligibility to the extent of the co-applicant's income.

iv) Step-up loan
Individuals can also enhance their loan eligibility by opting for step-up loans. A step-up loan is a loan wherein an individual pays a lower EMI during the initial years and the same is enhanced during the rest of the loan tenure. HFCs usually consider the lower EMI of the initial years to calculate his loan eligibility while the initial lower EMI helps increase the individual's 'capacity to borrow'.

v) Perks
Salaried individuals must ensure that variable sources of income like performance-linked pay among others are taken into consideration while computing their income. This in turn will imply that the loan amounts they are eligible for stand enhanced as well.

However, potential investors and borrowers must work out solutions best suited for their profile after speaking to their home loan consultant and only then consider acting on the options discussed. Because, increasing loan eligibility can have an impact on other aspects of their financial planning.