How banks decide how much to lend
Lenders mainly look at your FOIR (fixed obligation to income ratio): the share of your monthly income that goes on EMIs. Most banks cap it at 40–60% of net income, allowing more for higher earners. Whatever room your existing EMIs leave is the EMI a new loan can use, and that EMI decides the loan amount for a given rate and tenure.
Max EMI = income × FOIR − existing EMIs
Max loan = Max EMI × [(1+i)^n − 1] ÷ [i × (1+i)^n]Worked example
Other things lenders check
- Credit score: a CIBIL score above 750 gets better rates and larger loans.
- Age and tenure: the loan usually has to end by 60–65 (up to 70 for self-employed borrowers), which limits the tenure if you're older.
- Loan-to-value (LTV): for home loans, banks fund up to 90% for smaller loans, 80% for mid-size and 75% for large ones. The property's value can cap your loan even if your income allows more.
- Job stability: salaried applicants usually need 2+ years of work history; self-employed, 2–3 years of income tax returns.
Ways to increase eligibility
Add a co-applicant with income (often a spouse), close small loans or credit card EMIs before applying, choose a longer tenure, and correct any errors on your credit report. Just because a bank will lend you the maximum doesn't mean you should borrow it. Check the EMI against your full budget with the debt-to-income calculator.
Frequently asked questions
What is a good FOIR?
Below 40% is comfortable. Banks may accept up to 50–60%, but that leaves little room for savings and emergencies.
Does a co-applicant increase home loan eligibility?
Yes. The co-applicant's income is added, and their existing EMIs are counted too.
Why is my actual sanction lower than this estimate?
Banks may use gross or net income differently, apply stricter FOIR limits, or cap the loan by property value and your age.