How to calculate your Home Loan eligibility?
Generally banks calculate the elgibility for salaried individuals on the basis of their gross monthly pay. The banks assume that 50 to 60% of the gross salary can be utilized for regular monthly installments. In case you already have an existing monthly obligation the amount of the same will be deducted from the monthly repayment capability. Now the remaining amount will be your EMI amount for your loan eligibility calculation which also depends on your age and the tenure of the loan.
For example, Mr A has monthly gross salary of Rs 100,000 and has an existing Car Loan EMI of Rs 15,000.
Mr A's repayment capability according to bank's assumption: Rs 60,000
Existing EMI - Rs 15,000
Your monthly repayment capability - Rs 60,000- 15000 = Rs 45,000
So, the bank will offer you a loan with a maximum EMI of Rs 45,000*
*Please note that other conditions like your age, credit history etc has not been considered here.
For Self Employed
The calculation of eligibility for self emloyed individuals depends upon the yearly cash flows they generate from their business / profession. The banks derive the yearly cash flows through the following documents
- Last 3 years Income Tax Returns supported by computation of income
- Income received from any business run through company or partnership firm
- Last 6 months bank statements
Banks derive the calculation through the gross total income reflected in the income tax returns supported by other documents like audit reports and bank statements. Even non cash expenditures like depreciation etc are also added back in the annual income.