Buying a house is a dream scenario, but it begins with knowing how much you can borrow. And that’s where a home loan eligibility calculator comes in handy. It is an online calculator which provides an estimate of the amount for which you can be eligible for a loan, based on your income, age, profession, and other financial details. But though this calculator is handy, there are some essential factors to remember to make informed decisions.
In this article, we will understand how to make good use of a home loan eligibility calculator and what to remember while using it.
1. Understand the Function of the Calculator
The primary purpose of a home loan eligibility calculator is to give you a rough idea of the amount of loan you can avail based on your financial profile. It makes the first half of your home loan process easy and avoids guesswork. But it is not a guaranteed amount. Final eligibility depends upon the lender’s internal parameters, credit validation, and property valuation.
2. Accuracy of Input Details Matters
The calculator provides results based on the inputs you give. These are:
- Monthly salary
- Ongoing EMIs or liabilities
- Age
- Profession (salaried or self-employed)
- Loan tenure
Inaccurate or approximate figures can provide misleading results. An under-estimation of liabilities, for example, will show higher eligibility than you are likely to get. To get a true estimate, ensure you fill in exact figures wherever you can.
3. Debt-to-Income Ratio is Important
Almost all calculators take into consideration your Debt-to-Income (DTI) ratio, which is another determining factor for eligibility. Your DTI ratio is the comparison of your monthly debt expenses and your gross monthly income. In case you already have more than one EMI, your DTI would be high, decreasing your loan eligibility.
As a thumb rule, lenders would like to see a DTI of 40% or less. So, if your monthly income is ₹70,000 and your existing EMIs are ₹20,000, your DTI is around 28.5%, and there is scope for more borrowing.
4. Your Age and Loan Tenure Are Extremely Important
Your age also has an impact on the eligibility for the loan. The more youthful you are, the greater tenure you can choose, thereby getting a greater amount of eligibility. For example, a 28-year-old person can be eligible for a 25-30-year loan, whereas when you are in your 50s, you can get a shorter loan tenure since you are on the verge of retirement.
When using the home loan eligibility calculator, experiment with different tenure lengths to understand how it affects your loan amount.
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5. Employment Type and Stability Matters
Lenders assess the risk based on your employment status. Salaried individuals with stable jobs are often considered low-risk borrowers, especially if they work in reputed organisations. Self-employed professionals or business owners may be assessed more strictly.
While doing the computation with assistance from the calculator, be careful in selecting the appropriate type of employment, since it may affect how your income is calculated.
6. Interest Rate Assumptions Can Vary
All the eligibility calculators assume a default rate of interest to calculate your EMI and the eligible amount. But actual interest rates vary based on credit score, lender’s rules, type of loan (fixed rate or floating rate), and market conditions.
During the use of the calculator, play around with various interest rate options to come up with a range of outcomes. You will understand the process better as to how the changes might influence your eligibility as well as EMIs.
7. It’s a Pre-Assessment, Not a Final Decision
One of the most important things to note is that the home loan eligibility calculator gives an indicative amount, not a sure-shot approval. The approved amount can be different once your lender does a credit check, verifies your documents, and estimates the property you are planning to purchase.
Do not proceed with sole financial planning using the calculator. Use it as a helpful reference point when you apply for a housing loan.
8. Improve Eligibility Before Application
Don’t worry if the calculator shows weak eligibility. It can be improved:
- Pay off pending debts to lower your DTI ratio
- Add tenure to decrease EMI and increase affordability
- Add a co-applicant (like a spouse) to the club’s income
- Maintain a good credit rating by making payments on time
Repeating the calculator a few times with different inputs will help you understand how small changes can qualify you as a better loan applicant.
9. How Grihum Housing Finance makes the process simple
Grihum Housing Finance offers a simple home loan eligibility calculator that can assist you in calculating your borrowing power quickly and conveniently. Having a straightforward interface and instant computation, it allows potential borrowers to experiment with variables like income, term of ownership, and obligations to know their true estimate.
Their site is also offering professional guidance to applicants who wish to apply for a housing loan upon checking their eligibility, thereby maintaining the process smooth and personalised.
Conclusion
Using a home loan eligibility calculator is how you should start your home finance process. Even though it provides a rough estimate, it’s important to keep it as a point of reference and not as a final judgment. By providing precise information, understanding the underlying assumptions, and taking variables intelligently, you could use the calculator to your advantage.
And once you’re ready to proceed, Grihum Housing Finance possesses the skill, strength, and customer-driven philosophy to help you apply with confidence and make your homeownership a reality.
