How banks decide how much home loan you get
The bank does not start from the house price. It starts from your payslip, asks “what EMI can this income carry?”, and multiplies backwards into a sanction amount. The ratio doing the work is FOIR — fixed obligation to income ratio — the share of your gross monthly income already committed to EMIs and other fixed obligations, including the loan being applied for. Most lenders cap it between 40% and 55%, stricter at lower incomes.
The arithmetic is transparent once you see it. Earn ₹1 lakh a month with no existing EMIs, and a 40% FOIR gives you a ₹40,000 EMI budget. At 8.5% over 20 years, every ₹1 lakh of loan costs ₹868 a month, so ₹40,000 of EMI capacity converts to roughly ₹46.1 lakh of loan. That single chain — income → FOIR → EMI budget → principal — is the whole model. Everything else in this guide is about the variables that move each link.
The chain, link by link
Income means gross fixed monthly income, and lenders discount the unstable parts: variable pay usually counts at 50% or less, annual bonuses often not at all, and rental income at 70–80%. Self-employed applicants are assessed on ITR-declared profit averaged over two or three years — the year you optimised taxes by showing low profit is the year you shrank your loan.
Obligations are every EMI on your credit report plus the proposed one. This is where eligibility quietly dies: a ₹15,000 car-loan EMI inside a ₹40,000 budget leaves ₹25,000 for the home loan — about ₹28.8 lakh of loan instead of ₹46.1 lakh. Closing a small personal loan before applying frequently buys back more eligibility than any negotiation. Credit-card limits matter too: some lenders count ~5% of the outstanding balance as an obligation.
The conversion rate — EMI per lakh — is set by interest rate and tenure, which is why the same salary is quoted different amounts by different banks. Run your own numbers both ways on the home loan EMI calculator, and check what each bank actually charges on our bank rate pages — a 0.5% rate difference moves the sanction by lakhs.
| Interest rate | EMI per ₹1 lakh | Loan the budget supports |
|---|---|---|
| 8.5% | ₹868 | ≈ ₹46.1 lakh |
| 9.5% | ₹932 | ≈ ₹42.9 lakh |
The other ceiling: the property itself
FOIR is only one of two caps; the lower one wins. The second is loan-to-value (LTV): the RBI lets banks fund up to 90% of a property worth ₹30 lakh or less, 80% between ₹30–75 lakh, and 75% above that. On a ₹60 lakh flat, the bank lends at most ₹48 lakh regardless of your salary — the remaining ₹12 lakh plus stamp duty and registration (another 6–8% in most states, and almost never funded) must come from you.
So a ₹46 lakh FOIR capacity does not mean you can buy a ₹46 lakh home. Work the budget as: down payment you can fund without touching the emergency cushion, plus the smaller of your FOIR capacity and the LTV cap. Buying at the absolute edge of eligibility also leaves no room for the rate to float upward — and floating is what most home-loan rates do.
Levers that genuinely move the number
A co-applicant with income is the strongest lever: spouses’ incomes pool into one FOIR calculation, often nearly doubling capacity, and many lenders shave a few basis points off the rate for a woman as first applicant. A clean credit score is the next — below roughly 750, lenders either price the risk into your rate (shrinking the EMI-per-lakh conversion) or trim the FOIR cap itself.
Tenure is the seductive lever. Stretching from 20 to 30 years drops the EMI per lakh and inflates the sanction, but the extra decade of interest is brutal — the calculator’s amortisation view makes the trade visible in one glance. Use tenure to make a sensible purchase comfortable, not to make an oversized one possible. If the numbers only work at 30 years and 50% FOIR, the honest reading is that the house is too expensive for the income — a conclusion a fee-only planner will give you straight, because they earn nothing from the loan being sanctioned.
Questions people ask
What FOIR do banks allow on home loans?
Typically 40–55% of gross monthly income, including the proposed EMI. Higher incomes get more headroom; some lenders also apply an internal cap on the home-loan EMI alone at around 50% of net take-home.
How much home loan can I get on a ₹1 lakh salary?
With no existing EMIs, a 40% FOIR gives a ₹40,000 EMI budget — about ₹46 lakh at 8.5% over 20 years, or ₹43 lakh at 9.5%. Existing EMIs reduce it rupee-for-rupee, and a co-applicant raises it.
Do existing loans really reduce eligibility that much?
Yes — obligations subtract directly from the EMI budget. A ₹15,000 monthly car EMI costs about ₹17 lakh of home-loan capacity at 8.5%/20y. Where feasible, close small loans before applying.
Does my credit score change the amount or just the rate?
Both. Most lenders price rates by score band, and a lower rate converts the same EMI budget into a larger loan. Below ~700, many lenders reduce the permissible FOIR too, cutting the sanction twice over.
Is the eligibility amount the bank quotes what I should borrow?
No — it is the maximum the model tolerates, not a recommendation. Sanctions at the FOIR edge assume nothing in your life gets more expensive, including the loan itself. Leaving a 10-point FOIR margin is what keeps a rate hike from becoming a crisis.
Figures are computed with the same engines as our calculators, at the assumptions stated. This is general information, not investment or tax advice — AtFinance is not a SEBI-registered adviser.