EMI Calculations and Checklists
How much home loan can I get on my salary? Eligibility calculation with FOIR
How Indian lenders work out home loan eligibility from net income, existing EMIs and FOIR, with a worked example, the LTV check and ways to raise eligibility safely.
Lenders work out how much home loan you can get in two steps: first, how large an EMI your income can carry after existing EMIs, using a fixed obligation to income ratio (FOIR) that commonly sits between about 40% and 60% of net monthly income depending on income level and lender policy; second, what loan that EMI supports at the lender's rate and maximum tenure. The result is then capped by RBI's loan-to-value limits on the property. In an illustrative case with ₹1,20,000 net monthly salary, a ₹10,000 car loan EMI and a 50% FOIR, the room for a home loan EMI is ₹50,000, which supports about ₹57.6 lakh over 20 years at 8.5%.
This guide is part of the EMI calculation guide. FOIR levels, rates and tenures here are illustrative; each lender sets its own policy.
Step 1: the EMI your income can support
Lenders look at net monthly income: for salaried borrowers, take-home salary after tax and deductions as shown on salary slips and bank statements; for self-employed borrowers, income from recent income tax returns and financial statements, often averaged over two or more years.
Then they apply FOIR:
Existing EMIs include car loans, personal loans, education loans being repaid, and often a notional amount for credit card limits or outstanding balances.
Worked example (illustrative):
- Net monthly income: ₹1,20,000
- FOIR applied by the lender: 50%
- Maximum total EMIs: ₹60,000
- Existing car loan EMI: ₹10,000
- Room for home loan EMI: ₹50,000
Step 2: convert the EMI into a loan amount
The loan supported by an EMI is the EMI formula turned around: Loan = EMI × ((1 + r)^n − 1) ÷ (r × (1 + r)^n).
| Rate | 20 years | 25 years |
|---|---|---|
| 8.5% | about ₹57.6 lakh | about ₹62.1 lakh |
| 9.5% | about ₹53.6 lakh | about ₹57.2 lakh |
A one-point difference in rate changes eligibility by about ₹4 lakh here, and five more years of tenure adds about ₹4.5 lakh at 8.5%. Some lenders calculate eligibility at a rate slightly above the offer rate as a cushion; ask yours.
Step 3: the property and LTV cap
The loan cannot exceed RBI's loan-to-value limits: 90% of property cost for loans up to ₹30 lakh, 80% above ₹30 lakh up to ₹75 lakh, and 75% above ₹75 lakh. If our borrower chooses a ₹70 lakh flat:
- 80% of ₹70 lakh = ₹56 lakh
- Income-based eligibility at 8.5% over 20 years = ₹57.6 lakh
- The lower figure applies: ₹56 lakh
So the down payment would be ₹14 lakh, plus stamp duty and registration. See LTV limits and down payment.
Other checks lenders make
- Credit score and report. Recent delays, high card utilisation or many recent loan enquiries can lower the amount or raise the rate. See credit score and home loan rate.
- Age and remaining working years. The tenure usually has to end by a maximum age set in lender policy.
- Employment stability. Minimum time in the current job or business vintage for self-employed borrowers.
- Property approval. Legal title, approved plans and the builder's project approval with the lender.
Ways to raise eligibility, and their risks
| Lever | Effect in the example | Risk |
|---|---|---|
| Close the ₹10,000 car loan first | Room rises to ₹60,000; eligibility about ₹69 lakh at 8.5% over 20 years | Uses savings you may need for the down payment |
| Add an earning co-applicant | Combined income counts; see joint home loans | Both are fully liable for the loan |
| Choose a longer tenure | 25 years instead of 20 adds about ₹4.5 lakh | More total interest |
| Declare all regular income | Rent, variable pay or other documented income may count | Must be documented; lenders discount some types |
| Reduce credit card limits or balances | Lower notional obligations | Minor; check what your lender counts |
A personal affordability check
Before applying, write down:
- Take-home income each month, after tax and provident fund.
- All current EMIs.
- Household spending including rent until possession, school fees and insurance premiums.
- The proposed home loan EMI, and the EMI at a rate 1.5 points higher.
- Savings left after down payment, stamp duty, registration and moving costs.
If what remains each month is thin, consider a smaller loan or a cheaper property. Use the EMI calculator to find the loan that fits your budget, then compare it with the lender's eligibility figure.
Frequently asked questions
Why did two lenders give me different eligibility figures?
Each uses its own FOIR, rate, tenure, treatment of variable pay and existing obligations. One may also include a co-applicant's income differently. Ask each lender how it reached its number.
Does my variable pay or bonus count?
Some lenders include an average of documented variable pay, often at a discount. Regular monthly salary counts most reliably.
Can I get a home loan if I am self-employed?
Yes. Lenders usually look at income tax returns, profit and loss statements, balance sheets and bank statements for recent years. Housing finance companies are often more flexible with informal or irregular income, sometimes at a higher rate.
Does pre-approval guarantee the loan?
No. A pre-approved or in-principle sanction is based on your profile. The final sanction depends on the property's legal and technical checks and updated documents.
Sources
- Reserve Bank of India — loan-to-value limits and fair practices for lenders
- National Housing Bank — housing finance companies
- TransUnion CIBIL — one of the credit information companies whose reports lenders check
