How banks decide your home loan eligibility
Lenders mainly check how much of your monthly income is already committed to loans. This is called the fixed obligation to income ratio (FOIR). Most banks allow total EMIs, including the new home loan, up to about 40% to 60% of your net monthly income. Higher incomes usually get a higher limit.
Loan = EMI × (1 − (1 + r)−n) ÷ r r is the monthly interest rate (annual rate ÷ 12 ÷ 100) and n is the number of months. This is the EMI formula run backwards to find the loan.
Worked example
Ways to raise your eligibility
- Add a co-applicant. A working spouse or parent adds their income, and also helps with tax benefits.
- Clear small loans first. Closing a personal loan or credit card EMI frees up room straight away.
- Improve your credit score. A CIBIL score above 750 gets better rates and fewer questions.
- Choose a longer tenure. It lowers the EMI, so a larger loan fits within your limit. You can prepay later.
Frequently asked questions
What is a good FOIR for a home loan?
Most banks are comfortable when total EMIs are within 40% to 50% of net monthly income. Some go to 60% for higher incomes or strong credit profiles. Keeping it lower leaves room for savings and emergencies.
Does the bank lend the full price of the house?
No. For home loans, lenders usually finance up to 75% to 90% of the property value, depending on the loan size. You pay the rest as a down payment, plus stamp duty and registration.
Does my spouse’s income count?
Yes, if they apply as a co-applicant. Both incomes are added together, and both credit scores are checked.
Does a credit card limit reduce my eligibility?
Banks look at your outstanding dues and minimum payments, not the full limit. Large unpaid balances can still lower the loan you are offered.
Is this the loan I will definitely get?
No. This is an estimate based on income and EMIs. Your bank will also check your credit score, job stability, age, property papers and documents.