Home Loan Eligibility in India: Income, FOIR, LTV and Documents
How banks decide how much home loan you can get: income, existing EMIs, FOIR, loan-to-value limits, credit score and the documents you will need.
Before you fall in love with a house, find out how much a lender will actually let you borrow. Banks and housing finance companies use a handful of fairly standard checks to size a home loan. Knowing them lets you estimate your own eligibility, prepare your paperwork and avoid unpleasant surprises at the sanction stage.
1. The Main Factors Lenders Check
- Income and stability: Salaried applicants are assessed on net monthly salary and employer profile. Self-employed applicants are assessed on income tax returns, profit and loss statements and business vintage, usually two to three years.
- Age: The loan must normally end before retirement for salaried applicants, so younger borrowers can usually get longer tenures and larger loans.
- Existing obligations: Every running EMI, including car loans, personal loans and credit card dues, reduces what you can borrow.
- Credit score: A score of 750 or above generally gets the best rates and smoothest approval. A low score can mean rejection or a higher rate.
- Property: The property must have a clear title, approved plans and, for under-construction homes, a registered builder.
2. FOIR: The Rule That Decides Your Loan Size
Most lenders use the Fixed Obligation to Income Ratio (FOIR): the share of your net monthly income that can go toward EMIs. Many lenders allow roughly 40% to 60% depending on income level, with higher incomes usually permitted a higher ratio.
• Net monthly income: ₹80,000
• FOIR allowed (assume): 50% = ₹40,000 available for all EMIs
• Existing EMIs: ₹10,000, so ₹30,000 is left for the new home loan
• At 8.75% for 20 years, each ₹1,00,000 costs about ₹884 per month, so ₹30,000 supports a loan of about ₹33.9 Lakhs
• At 8.75% for 30 years, each ₹1,00,000 costs about ₹787 per month, so the same ₹30,000 supports about ₹38.1 Lakhs
This is why clearing a small personal loan or credit card balance before applying can raise your eligibility by several lakhs: every ₹1,000 of EMI removed frees up about ₹1.1 Lakhs of home loan at these rates. Our home loan calculator lets you reverse the process by entering the loan amount and checking whether the resulting EMI fits within your own FOIR.
3. Loan-to-Value (LTV) Limits
Regardless of income, lenders cannot finance the whole price of the property. RBI sets maximum Loan-to-Value ratios for individual home loans, currently:
| Loan Amount | Maximum LTV | Minimum Down Payment |
|---|---|---|
| Up to ₹30 Lakhs | 90% | 10% |
| ₹30 Lakhs to ₹75 Lakhs | 80% | 20% |
| Above ₹75 Lakhs | 75% | 25% |
Remember that registration, stamp duty, brokerage and furnishing costs are usually not financed, so budget extra cash for them. Always confirm the current norms with your lender, since regulations can change.
4. Documents You Will Typically Need
- Identity and address: PAN card, Aadhaar, passport or driving licence.
- Income proof (salaried): Last three to six months' salary slips, Form 16 and six months' bank statements.
- Income proof (self-employed): Last two to three years' income tax returns with computation, audited financials and business registration proof.
- Property documents: Sale agreement, title documents, approved plan, builder's allotment letter and payment receipts.
5. How to Improve Your Eligibility
- Add a co-applicant with income, such as a spouse. Both incomes count toward eligibility, and both can claim tax deductions under the old regime.
- Clear small loans and card balances before applying, and avoid new credit applications in the preceding months.
- Check your credit report for errors well in advance and get them corrected.
- Choose a longer tenure to qualify for the amount you need, then plan to prepay when you can.
- Make a larger down payment to reduce the loan you need.
Note: Eligibility figures above are illustrative. Each lender applies its own policy, so the amount actually sanctioned may differ. Being eligible for a large loan does not mean you should take it; compare the EMI with your real monthly budget first.