Many people aspire to own a house. The reasons may vary; it could be for staying, or as an investment for a future financial goal. However, owning a house involves a significant involvement of funds. Keeping this in mind, it is prudent to put up a portion of the money as a down payment and finance the rest of it by taking a home loan. It is advisable to check the offers of various lending institutions and ascertain which one is most suited in terms of the interest cost, tenure, and EMIs. Salaried individuals have a good chance of getting a home loan as they have fixed sources of income.
Read on to know the home loan amount one can expect to get as a salaried individual:
Understanding the concept of in-hand salary in the context of a home loan
For a salaried person how much home loan I get on my salary, the lending institution considers the applicant’s net salary or in-hand salary. One should know the difference between gross salary and net salary. Almost all lending institutions ask for the net salary of the applicant to decide the home loan amount. Applicants should be aware of this while applying for a home loan.
The salary of an individual can be divided into two parts which are:
- Basic pay
- Allowances and benefits
Both the parts mentioned above constitute the gross salary. However, one should know that a person does not get the gross salary. Several deductions are made from an employee’s salary like provident fund, professional tax, and TDS (Tax Deduction at Source). The in-hand salary that remains after deductions is called the net salary. The net salary is used to determine the amount of the home loan that may be sanctioned. The repayment capacity and creditworthiness of a home loan applicant are evaluated based on the net salary.
Home loan amount based on net salary
As per the industry thumb rule, an applicant can get a home loan up to 60 times the net salary. For example, for an in-hand monthly salary of INR 20,000, the applicant may expect to get a home loan up to INR 12 lakh. One should know that the rule of thumb states the maximum home loan amount one can get. There is no fixed rule or certainty that the final sanctioned amount will be up to 60 times your net salary. In an ideal scenario, one can get a home loan up to 60 times their net monthly salary.
Before the lending institution approves a home loan, it considers a variety of factors, other than the monthly salary. One may have a handsome monthly salary and still fail to acquire a home loan due to a bad credit score. The monthly salary is one of the factors used by lending institutions to decide the home loan amount. In India, home loan eligibility can vary from one lending institution to another. That’s why it’s important to compare rates.
Factors responsible for deciding the home loan amount
As mentioned, other factors come into play for deciding the home loan amount besides the net salary of the applicant. The deciding factors for the home loan amount in India are:
- Usually, there is an age limitation on home loans. The age limitation for home loans can differ from one lending institution to another. Usually, the age bracket for a home loan in India is 21-55 years.
- The employment status of the applicant is checked before offering a home loan. Lending institutions prefer applicants having a stable employment status or work experience. Lenders can demand salary slips for the past few months before offering a home loan.
- Applicants need to have a healthy credit score/history to acquire a home loan. By having a healthy credit score, one can get the best home loan rates in India.
The value of the property to be purchased has a bearing on the home loan amount. The lending institution conducts due diligence regarding the statutory clearances and sanctions that the property has.