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Purchasing a home is a significant milestone that often requires financial assistance in the form of a home loan. For salaried employees, meeting the minimum salary for a home loan, along with the stability of regular income, is a significant advantage when applying.

This article explores the factors that determine minimum salary for home loan and what salaried individuals need to know to enhance their eligibility.

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Home Loan Interest Rates for Salaried Employees

Bank/ HFCs	Interest Rate	Maximum Loan Amount	Tenure
HDFC Bank	8.75% p.a. onwards	Up to Rs. 15 Crore	30 years
ICICI Bank	8.75% p.a. onwards	Up to Rs. 5 Crore	30 years
SBI	8.50% p.a. onwards	Up to Rs. 15 Crore	30 years
Kotak Mahindra	8.75% p.a. onwards	Rs. 20 lakhs – Rs. 75 lakhs	25 years
Bajaj HFL	8.50% p.a. onwards	Up to Rs. 5 Crore	40 years
LIC HFL	8.50% p.a. onwards	Up to Rs. 5 Crore	30 years
Punjab National Bank	8.50% p.a. onwards	Rs. 8 lakhs onwards	30 years
Bank of Baroda	8.40% p.a. onwards	Up to Rs. 20 Crore	30 years
IDBI	8.55% p.a. onwards	Up to Rs. 10 Crore	30 years
Tata Capital HFL	8.75% p.a. onwards	Up to Rs. 5 Crore	30 years
Canara Bank	8.55% p.a. onwards	No Upper Limit	30 years
Bank of India	8.40% p.a. onwards	Up to Rs. 5 Crore	30 years
Karur Vysya Bank	9.00% p.a. onwards	As per applicant’s repayment capacity	30 years

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Eligibility Criteria

Criteria	Requirement
Nationality	1. Resident of India 2. NRIs
Age	23 years – 60 years
Eligible Job Profile	1. Private sector 2. Public sector 3. LLP Partnership 4. Proprietorship
Job Stability	Continuous employment with the current employer for at least 1 year
Employment Tenure	A minimum of 2 years of total work experience is required
Minimum Salary	Rs. 25,000
Credit Score	750+

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Documents Required for a Home Loan for a Salaried Employee

General Documents Required for Home Loan

Document Type	Documents Required
Identity and Residence Proof	PAN card, Driving License, Voters ID Card, Passport.
Residence Proof	Electricity Bill, Ration Card, Telephone Bill, Employment Letter, Passbook or Bank Statement with address.
Proof of Age	PAN card, Passport, Birth certificate, Driving license, Bank passbook, Marksheet from 10th class.
Bank Account Statement/Passbook	For the last 6 months
Signature Verification	By bankers of the applicant

Documents for Salaried Individuals

Document Type	Documents Required
Salary Certificate	Original, from the employer.
Form 16/IT Returns	For the past 2 financial years
Employment-related Documents	Employer Certificate Appointment Letter Increment Letter Promotion letter Duly Attested by employer Copy of Employee I-Card
Bank A/C Statement (Salary)	For the last 6 months

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Property Documents

1. Deed of Sale or Sale Agreement or Share Certificate:
   (original) in case of a cooperative society.
   
2. Receipts for taxes paid:
   For Building and Land, certificate of possession, and a certified sketch of the property’s location from revenue authorities.
   
3. Allotment Letter:
   From Society/Housing Board/Private Builder.
   
4. Certificate of Non-encumbrance:
   Encompassing the last 12 years/30 years.
   
5. Permission letter:
   From Appropriate Authority.
   
6. Approved Building Plan:
   Showing floor plan for flat purchase.
   
7. Original No Objection Certificate (NOC):
   Issued under the ULC Act, 1976.
   
8. Detailed Estimate of Construction Cost.
   
9. Letter from Society/Builder/Housing Board: Mentioning their bank and account details for installment remittance.
   
10. Applicable for purchase of land plot: A declaration by loan borrower stipulating the date by which to construct a house.
    
11. Legal and Valuation Reports: Report from a lawyer and a report stating the valuation of property in a standard format by an empanelled valuer.
    

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Documents Required for NRIs

Document Type	Document Required
Identification and KYC Documents	Document Establishing KYC: Basic KYC requirements. Copy of Passport: Showing the page of residence visa.
Employment and Income Verification	Salary Certificate: Issued by employer, stating details like name (as per passport), designation, passport number, date of joining, and latest salary, all mentioned in English. Salary Slips: Last 3 to 6 months’ slips reflecting variable components like incentives, overtime, etc. Proof of Employment: Documents like work permit, labor contract, etc., provided by the Government of the residing country. Income Documents Attested by Embassy: Required if there’s no documented evidence for salary credit or fund remittance to India. Email ID of HR (Employer): To verify employment details. Employment Profile: Documenting the last 5 years of employment history.
Financial Statements	Overseas Bank Statement: Copies from overseas banks for the past 6 months. NRO/NRE Bank Statement: Last 6 months to trace the financial transactions in India.
Property Related Documents	Property Documents: Including cost estimates from an Indian Architect or Engineer.
Legal and Power of Attorney	Power of Attorney: If the applicant is unavailable in the country at the time of signing documents, a Power of Attorney needs to be produced by the person acting on their behalf.

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Why Do Salaried Employees Have an Advantage?

1. Stable and Predictable Income

• Consistency:
  Salaried employees receive a fixed paycheck at regular intervals (monthly, bi-weekly, etc.)therefore, making it easier for lenders to assess their ability to repay the loan.
  
• Reduced Risk:
  Predictable income reduces the risk of default because, with a steady cash flow, there is a reliable means to cover mortgage payments.

2. Simplified Income Verification

• Easier Documentation:
  Salaried individuals typically need to provide fewer documents to verify income, such as recent pay stubs, employment verification letters, and tax returns.
  
• Less Complexity:
  Self-employed applicants often have more complex financial situations, therefore requiring additional documentation like profit and loss statements, which in turn can delay the loan approval process.

3. Higher Approval Rates

• Preference by Lenders:
  Many lenders prefer the stability associated with salaried employment; therefore, this preference leads to higher approval rates for salaried applicants.
  
• Lower Scrutiny:
  The straightforward nature of salaried income often results in less stringent scrutiny compared to self-employed individuals, who may need to demonstrate consistent income over several years.

4. Better Interest Rates and Terms

• Lower Risk Premiums:
  Since salaried employees are viewed as lower risk, they may qualify for more favorable interest rates.
  
• Flexible Loan Terms:
  Lenders might offer more flexible repayment terms to salaried borrowers; consequently, making the loan more affordable over time.

5. Higher Borrowing Capacity

• Debt-to-Income Ratio:
  Salaried individuals typically have a clearer debt-to-income (DTI) ratio, which allows lenders to therefore more accurately determine their borrowing capacity.
  
• Predictable Financial Profile:
  A stable income stream can support a higher loan amount because lenders have confidence in the borrower’s ability to manage larger repayments.

6. Quicker Loan Processing

• Streamlined Process:
  The straightforward financial profile of salaried employees can significantly expedite the loan processing time.
  
• Fewer Contingencies:
  With a reduced need for extensive financial verification, the path from application to approval can therefore be faster.

7. Employment Benefits and Perks

• Job Security:
  Positions with long-term contracts or those in stable industries (e.g., government, large corporations) can further enhance loan eligibility.
  
• Additional Income Sources:
  Benefits like bonuses, overtime, or other compensations, when stable, can also bolster a salaried employee’s loan application.

8. Regulatory and Institutional Policies

• Lender Guidelines:
  Some financial institutions have specific policies favoring salaried borrowers due to the reasons mentioned above.
  
• Government Schemes:
  Certain home loan schemes and subsidies may be exclusively available to salaried individuals, providing additional incentives.

9. Credit Score Impact

• Easier Credit Building:
  Regular, on-time salary deposits can help maintain or improve credit scores, which are crucial for loan approval and favorable terms.
  
• Reduced Financial Stress:
  A steady income minimizes the chances of missed payments, safeguarding the borrower’s credit history.

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Repayment Options

Indian banks and financial institutions offer a range of repayment structures tailored to suit different financial situations and preferences.

Here’s an overview of the repayment options available for salaried employees in India:

Category	Definition	Advantages	Disadvantages
Fixed EMI	The most common repayment method where the borrower pays a fixed amount every month throughout the loan tenure.	Easier budgeting as the EMI amount remains constant. Straightforward to understand and manage.	Total interest paid over the loan tenure may be higher compared to some other methods.
Reducing EMIs	EMIs decrease over time as the principal amount reduces.	Interest Savings: Lower total interest payment as the outstanding principal reduces faster. Ease in Later Years: Reduced EMI amounts can ease financial burden in later stages.	Initial Higher EMIs: Requires higher payments initially, which may strain early financial planning.
Step-Up EMIs	EMIs increase gradually at predetermined intervals during the loan tenure.	Adaptability to Income Growth: Suitable for individuals expecting income increments over time. Manageable Initial Payments: Lower EMIs at the beginning, which can be increased as financial capacity improves.	Complexity: More complex to plan and manage compared to fixed EMIs. Potential for Higher Burden: If income does not grow as expected, higher EMIs may become burdensome.
Interest-Only Repayments	Borrowers pay only the interest component for a specified period, followed by regular EMI payments.	Lower Initial Payments: Reduced financial strain during the interest-only period. Cash Flow Management: Helps manage cash flow better in the initial years.	Delayed Principal Repayment: Principal remains unchanged during the interest-only period, leading to higher outstanding amounts. Increased Total Interest: Longer repayment period may result in higher total interest costs.
Offset Accounts and Linked Deposits	An offset account is a savings or current account linked to the home loan. The balance in this account offsets the loan principal, reducing the interest payable.	Interest Savings: Reduces the effective principal on which interest is calculated. Flexible Access: Provides liquidity as funds remain accessible for other needs.	Account Fees: May involve higher fees for maintaining the offset account. Usage Discipline: Requires disciplined saving to maximize benefits.

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Home Loan Tax Benefits

1. Deduction for Interest Paid on Housing Loan (Section 24)

• Eligibility:
  Loan must be for purchase or construction, completed within 5 years from the loan’s financial year.
  
• Deduction Limits:
  • Self-Occupied Property: Up to Rs 2 lakh.
  • Let Out Property: No upper limit on interest deduction.
  • Exceeding Construction Time: Deduction limited to Rs 30,000 if construction exceeds 5 years.
    

2. Deduction on Interest for Pre-Construction Period

• Eligibility:
  Applies to under-construction properties; deduction starts upon completion.
  
• Calculation:
  Interest paid during pre-construction divided into 5 equal instalments, claimable from the year of completion, capped at Rs 2 lakh.
  

3. Deduction on Principal Repayment (Section 80C)

• Limit: Up to Rs 1.5 lakh annually.
  
• Condition: Property must not be sold within 5 years of possession; otherwise, the deduction will be reversed.
  

4. Deduction for Stamp Duty and Registration Charges (Section 80C)

• Claim Period: Only in the year these expenses are incurred, within the overall Rs 1.5 lakh limit.
  

5. Additional Deduction (Section 80EE)

• Limit: Up to Rs 50,000.
  
• Eligibility: First-time homebuyers, loan amount up to Rs 35 lakh, property value up to Rs 50 lakh, loan sanctioned between April 1, 2016, and March 31, 2017.
  

6. Additional Deduction for Affordable Housing (Section 80 EEA)

• Limit: Up to Rs 1.5 lakh.
  
• Eligibility: Property stamp value under Rs 45 lakh, loan sanctioned from April 1, 2019, to March 31, 2022, and must be the first-time homebuyer.
  

7. Deduction for Joint Home Loan

• Benefit: Each co-owner and co-borrower can claim deductions independently.
  
• Limits:
  • Interest: Up to Rs 2 lakh each.
  • Principal: Up to Rs 1.5 lakh each under Section 80C.
    

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Common Mistakes to Avoid

Here are some of the common mistakes to avoid while availing a home loan:

Mistake	Solution
Over-borrowing	Assessment: Borrow only what you can comfortably repay. Buffer: Leave room for other financial commitments and emergencies.
Ignoring the Fine Print	Terms and Conditions: Read all clauses carefully to avoid hidden charges. Clauses: Pay attention to default penalties, rate changes, and other critical terms.
Not Considering Additional Costs	Processing Fees: One-time charges levied by the lender during application. Legal and Valuation Fees: Costs associated with property verification. Insurance: Some lenders may require you to insure the property or the loan.

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Conclusion

Taking out a home loan is indeed a significant milestone for salaried employees who are aiming to own their dream home. Moreover, with Credit Dharma, you can access competitive interest rates, along with flexible repayment options, and personalized guidance throughout the loan process.

Don’t let financial constraints hinder your homeownership aspirations instead ,reach out to Credit Dharma today and take the first step toward turning your dream into reality.

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Frequently Asked Questions