How much home loan you can get is decided by two separate limits. The first is based on your repayment capacity. The second is based on the property's value. Your actual loan is the lower of the two.
Limit 1: your repayment capacity (FOIR)
Lenders look at what share of your monthly income can go towards EMIs. This is called the FOIR (fixed obligations to income ratio). Many lenders allow total EMIs (your new home loan plus existing loans such as a car loan or personal loan) of roughly 40–60% of your net monthly income, depending on your income level, job stability and the lender's policy.
From the EMI you can afford, the lender works backwards to the loan amount, using the interest rate and tenure.
A handy rule of thumb: at an interest rate of 8.5% a year over 20 years, the EMI is about ₹868 for every ₹1 lakh borrowed. Rates differ between lenders and change over time, so use your lender's actual rate when you plan.
Limit 2: the property's value (LTV)
The Reserve Bank of India caps how much of a property's value banks can lend, called the loan-to-value (LTV) ratio:
| Loan amount | Maximum LTV |
|---|---|
| Up to ₹30 lakh | 90% |
| Above ₹30 lakh and up to ₹75 lakh | 80% |
| Above ₹75 lakh | 75% |
Lenders generally calculate this on the property's agreement value. Stamp duty and registration are usually excluded, which is why you need your own funds for them.
A worked example
Priya earns a net salary of ₹1,20,000 a month and already pays a ₹10,000 car loan EMI. Her lender allows a FOIR of 50%.
- Maximum total EMIs: 50% × ₹1,20,000 = ₹60,000
- Available for the home loan: ₹60,000 − ₹10,000 = ₹50,000 EMI
- Loan at 8.5% over 20 years: ₹50,000 ÷ ₹868 × ₹1 lakh ≈ ₹57.6 lakh
- With an 80% LTV, she needs a property worth at least about ₹72 lakh to borrow the full amount, and must bring at least 20% of the price plus stamp duty, registration and other charges herself.
What else lenders look at
- Credit score: a score of 750 or above generally gets you better rates and faster approval. Check your report and fix errors before applying.
- Age and tenure: most lenders offer up to 30 years, but the loan usually has to end by a certain age (often 60–70), so older applicants may get shorter tenures and lower eligibility.
- Employment and income stability: salaried applicants with a few years at a stable employer are simpler to assess; self-employed applicants typically need two to three years of income tax returns.
- The property itself: the lender's legal and technical teams must approve the title and construction.
How to improve your eligibility
- Add a co-applicant with income, such as a spouse or parent. Combined income raises the EMI the lender will allow, and joint ownership can bring tax benefits to both.
- Close small loans and clear credit card balances before applying.
- Choose a longer tenure to reduce the EMI (you'll pay more interest overall, so prepay when you can).
- Increase your down payment to stay within LTV limits and reduce the loan you need.
- Compare lenders: FOIR policies, rates and fees differ.
For individual borrowers, banks cannot charge a prepayment penalty on floating-rate home loans. Most floating-rate retail loans are linked to an external benchmark such as the RBI repo rate, so your EMI or tenure moves with it.
Bottom line
Work out both limits before you start house-hunting: the EMI you can comfortably pay (not just the maximum a bank allows) and the down payment and charges you can fund yourself. Then use our guide to the real cost of buying a flat to set a realistic budget.