I have a Low Salary. Can I get a Home Loan?

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“I have a low salary. How much home loan can I get?” If you are a salaried employee, doesn’t earn much and want to buy a house, the first question that comes to mind is how much you will get. However, with real estate prices out of reach for the majority of the salaried population, this dream can only be realised later in life, once they have saved enough money. This is where a Tata capital home loan can help one achieve their dream of owning a home at a young age. This article will explain what affects your eligibility, and how to understand your salary. Let’s see how much home loan you can get if your monthly income is Rs 20,000.

Understand your salary breakup: Salary is commonly expressed as either gross or net (also known as in-hand salary). It is critical to understand the distinction between them because financial institutions frequently consider the net component of a person’s salary when determining Tata capital home loan eligibility. Salary structure varies by organisation, but it is broadly divided into the following components:

  • Basic Wage
  • Medical Allowance
  • Leave Travel Allowance (LTA),
  • House Rent Allowance (HRA),
  • And other Allowances, for example.

The above components constitute the gross portion of the salary. However, this is not the final amount that the employee receives; there are mandatory deductions from the gross total, such as Employee Provident Fund (EPF), Tax Deduction at Source (TDS), Professional Tax, and so on. What is left over is known as an employee’s net salary or in-hand salary. This net salary is used to determine a home loan eligibility.

What factors influence your loan borrowing capacity?

Age: Most banks prefer that the borrower is no older than 58 years old when they pay their final EMI as that could afffect the interest rate. If you are approaching the age of 50, your bank will only offer you a re-payment period of 6-8 years. If you are 35, however, your repayment period can easily be extended to 20 years. A longer repayment period may also allow the borrower to prepay the loan. However, it may be subject to additional fees and terms that vary between banks.

Salary: Most banks do not include allowances, perks, bonuses, and performance-based pay in your salary. If these components constitute a significant portion of your salary package, your loan eligibility is likely to be reduced. They are solely concerned with the fixed pay of your compensation.

Liabilities: Borrowers’ liabilities (including EMIs from other loans) should not exceed 55-60% of their monthly income.

Expenses and cash flow: Most banks assume that up to 40% of a borrower’s monthly income can be allocated to EMI payments. The monthly expenditure of a borrower is examined to determine the loan amount, taking into account his salary and the EMI he is capable of paying comfortably. For example, if your monthly income is Rs 1,000,000, the bank will assume you can pay a maximum EMI of Rs 40,000. The loan amount that can be sanctioned will then be determined by the tenure and the applicable interest rate.

Existing Obligations (also known as Fixed Obligation to Income Ratio or FOIR): Financial institutions determine a person’s eligibility for a Tata capital home loan only after considering their existing obligations with respect to EMIs and outstanding dues of other loans that they may have obtained, such as a car loan, consumer durable loan, personal loan, credit cards, and so on. This is done to ensure that the person applying for an Indiabulls home loan is not overburdened with debt and can comfortably pay EMIs on a regular basis. FOIR is the ratio of one’s total monthly obligations to one’s net monthly income. Typically, it should be less than 50% in order to be eligible.

LTV (Loan to Value): Even if your net monthly income qualifies you for a higher home loan, financial institutions will only fund up to 75% to 90% of the total cost of the property. This is done to ensure that they have a sufficient buffer to liquidate the underlying asset and recover their investment in the event of a default.

Legal and technical approval of the property: When it comes to Tata capital home loan, the condition of the underlying asset is critical. Financial institutions use two main criteria to evaluate the property that the applicant is about to purchase. The first is to examine the property’s legal chain in order to establish clear title and ownership, and the second is to determine the market value of the property. Both of these evaluations are typically performed by independent lawyers and valuers appointed by the financial institute.

Home loan Application

Before you start looking for your dream home, you should have an idea of how much you can borrow based on your income. It will assist you in making a financial decision about the property you wish to purchase. You can use the Tata capital home loan eligibility calculator to determine how much money you are eligible for. Once the property has been finalised, you can go to the any Indiabulls home loan website and fill out the enquiry form to get a call back from one of our Counsellors.

How Much Home loan Can I Afford Based on My Salary?

As a general rule, salaried individuals are eligible for home loans of up to 60 times their net monthly income. So, if your net monthly salary is 40,000, you can qualify for a home loan of up to 24 lahks. Similarly, if you earn 35,000 per month, you can get up to 21 lakh. A Indiabulls home loan eligibility calculator, which takes into account factors other than net monthly income, is an accurate way of determining eligibility.

Note: If a household has more than one earning member, the net monthly income of all earning members will be combined by the lender to determine a higher Indiabulls home loan eligibility amount.

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