How Much Home Loan Can I Get? Eligibility Explained

How banks think about your loan

A bank has one big question: if we lend this person money, will it come back on time? To answer it, lenders look at several things at once. Your income and how stable it is. Your existing loans and credit card dues. Your credit score. Your age and how many working years you have left. And the home you want to buy.

From these they arrive at two limits. The first is a limit based on your income, which is the part this guide focuses on. The second is a limit based on the property, because banks will lend only a percentage of its value. Your eligible loan is the smaller of the two.

FOIR: the number that decides most things

FOIR stands for fixed obligation to income ratio. It is the share of your monthly income that goes to fixed payments such as EMIs. Lenders set a ceiling, and it depends on the lender and on your income level. Many banks allow somewhere between 40% and 55%, and a higher share is sometimes allowed for higher incomes.

The room for a new EMI is simple to work out. Take your monthly income, multiply by the FOIR limit, and subtract the EMIs you already pay. What is left is the most you can add. The bank then asks how big a loan that EMI can repay over the term you choose.

A worked example

Let us take someone who earns ₹80,000 a month after tax. They already pay ₹10,000 a month on a car loan. They want a 20-year home loan at 8.5%, and their bank uses a 50% FOIR.

Step one: 50% of ₹80,000 is ₹40,000. Step two: subtract the ₹10,000 car EMI. The room for a new EMI is ₹30,000. Step three: work out the loan that a ₹30,000 EMI repays over 240 months at 8.5%. The answer is about ₹34,56,925.

Over the 20 years that person would repay about ₹72 lakh in total, so about ₹37.5 lakh is interest. We looked at this in detail in our guide on how to pay less home loan interest.

You can try different numbers in the home loan eligibility calculator in a few seconds. It is worth playing with the numbers to see which one moves the result most.

What raises or lowers the figure

Using the same person, here is how each change moves the eligible loan at 8.5% over 20 years.

• FOIR of 40%: room ₹22,000, loan about ₹25.4 lakh
• FOIR of 45%: room ₹26,000, loan about ₹30.0 lakh
• FOIR of 50%: room ₹30,000, loan about ₹34.6 lakh
• FOIR of 55%: room ₹34,000, loan about ₹39.2 lakh
• Clear the ₹10,000 car EMI first: room ₹40,000, loan about ₹46.1 lakh
• Add a co-applicant earning ₹40,000, with the same existing EMI: room ₹50,000, loan about ₹57.6 lakh

Two patterns stand out. Existing EMIs have a heavy effect, because each rupee of EMI removes about ₹115 of eligible loan. And a co-applicant with income can change the picture completely.

Tenure and interest rate also matter

A longer tenure lowers the EMI for the same loan, so it raises the loan your income can support. For the same ₹30,000 of room at 8.5%, a 10-year tenure supports about ₹24.2 lakh, 15 years about ₹30.5 lakh, 20 years about ₹34.6 lakh, 25 years about ₹37.3 lakh and 30 years about ₹39.0 lakh.

Notice the pattern. Stretching from 20 to 30 years adds only about ₹4.4 lakh of eligibility, but it adds a great deal of interest. A longer tenure is a tool for eligibility, not a free gift.

The rate works in the other direction. At 8% the same ₹30,000 supports about ₹35.9 lakh, and at 10% about ₹31.1 lakh. A lower rate means you can borrow more for the same EMI, so a good rate helps you twice.

Your credit score and credit history

Your credit score is a number, usually between 300 and 900, that sums up how you have handled credit. Banks generally like to see 750 or above for a home loan. A lower score may still get you a loan, but often at a higher rate or with a smaller amount, and some banks will decline.

A few habits help. Pay every EMI and credit card bill on time. Keep your card use well below the limit. Avoid applying for several loans or cards at once, because each application leaves a mark on your record. And check your own credit report for errors, since mistakes happen and they can be corrected.

If your score is low, it can pay to wait a few months and fix it before applying. A better score can earn a lower rate, and over a 20-year loan even a small rate cut is worth lakhs.

The property limit: how much of the price the bank will fund

Even if your income supports a bigger loan, the bank will not lend the full price of the home. Under the RBI's rules for housing loans, the maximum loan as a share of the property value depends on the amount. It is up to 90% for loans up to ₹30 lakh, up to 80% for loans above ₹30 lakh and up to ₹75 lakh, and up to 75% for loans above ₹75 lakh.

So on a ₹60 lakh home, a lender can finance at most 80%, which is ₹48 lakh, and you must bring the other ₹12 lakh as a down payment. On a ₹90 lakh home the cap is 75%, so ₹67.5 lakh, and you need ₹22.5 lakh of your own money.

Remember to budget for more than the down payment. Registration, stamp duty, the processing fee and moving costs can add several percent to the price, and these usually come from your own pocket.

Age, job type and how banks see your income

Banks want the loan repaid before you retire, so the maximum tenure is tied to your age. A person of 30 can usually get 30 years. A person of 50 may only get 10 or 15, which lowers the eligible amount for the same income.

The type of job matters too. Salaried people with a stable employer are the easiest to assess. Self-employed people and business owners are asked for income tax returns, usually for the last two or three years, and the bank uses the income shown there. If your returns show a low income, your eligibility follows it, even if your real earnings are higher.

Some lenders also count part of variable pay, rental income and certain other regular earnings, often at a reduced share. Ask your bank which of your income sources it will count, because it changes the answer.

Seven ways to raise your eligible loan

If the number is lower than you need, there are practical ways to improve it before you apply.

1. Pay off or close small loans, especially ones with high EMIs and little time left. Each rupee of EMI you remove frees up about ₹115 of loan.
2. Add a co-applicant who has a steady income, such as a spouse or a parent. Their income and obligations are counted together with yours.
3. Reduce your credit card dues and avoid using most of your limit before you apply.
4. Improve your credit score if it is below 750, and check your report for mistakes.
5. Choose a longer tenure, but plan to prepay later so the interest does not run away.
6. Increase your down payment. A bigger down payment means a smaller loan to qualify for.
7. Keep your income records clean. File your returns on time and keep salary slips and bank statements ready.

Eligible is not the same as affordable

This is the most important point in the whole guide. A bank's FOIR limit is set to protect the bank, not your peace of mind. A 50% FOIR means half of your take-home pay goes on EMIs, before food, school fees, travel, medical bills and anything for retirement.

A safer rule of thumb is to keep the total of all EMIs near 35% to 40% of your monthly income. For the person in our example, that means a home loan EMI of roughly ₹18,000 to ₹22,000 rather than ₹30,000. The eligible loan at that EMI is smaller, about ₹20.7 lakh to ₹25.4 lakh at 8.5% over 20 years, but the monthly pressure is much lighter.

Also keep an emergency fund of at least three to six months of expenses and EMIs in an easily accessible place such as a savings account or a short fixed deposit. If the rate goes up or your income dips, that cushion keeps your home safe.

Your step-by-step plan before house hunting

Here is the order we suggest to avoid unpleasant surprises.

1. Write down your monthly take-home income and every EMI you pay.
2. Use the eligibility calculator with a conservative FOIR of 40% to see a safe loan amount, and then with the bank's likely limit to see the maximum.
3. Decide your budget from the lower figure plus your down payment and costs.
4. Check your credit score and fix any problems.
5. Ask two or three banks for an in-principle approval, and compare the rate, the fee and the loan amount.
6. Only then start visiting homes that fit your real budget.

Documents the bank will ask for

Being ready with paperwork speeds up the whole process and avoids back-and-forth. Banks usually ask for the following, though lists differ.

• Proof of identity and address, such as Aadhaar, PAN, passport or voter ID.
• Recent salary slips, usually the last three months, and Form 16 or income tax returns for the last two or three years.
• Bank statements for the last six months to a year, to show your income and spending pattern.
• For self-employed applicants, business proof, profit and loss statements and balance sheets.
• Property documents once you have chosen a home, such as the sale agreement, title papers and approved plans.

A quick tip: check that the name and details match across all your documents. Small mismatches in a name or an address are one of the most common reasons for delays.

Questions people ask

Sources and further reading

• Reserve Bank of India – Housing finance and loan-to-value norms
• Punjab National Bank – Home loan information
• TransUnion CIBIL – Understanding your credit score