Before you fall in love with a home, it helps to know how much a bank will lend you. Banks look at four limits. The smallest one decides your loan.
Limit 1: Your income
Banks look at your take-home pay and how much of it can safely go to EMIs. For a salaried person, they mainly count your fixed monthly salary. Bonuses and variable pay may be counted only partly, or averaged.
Limit 2: What you already owe
EMIs you already pay, such as a car loan or personal loan, reduce what is left for a home loan. Credit card dues count too. Closing a small loan before applying can make a real difference.
Limit 3: Your age
Banks usually want the loan to end before you retire, or by an age they set. A 28-year-old can often get a longer loan than a 45-year-old, which means a lower EMI for the same amount.
Limit 4: The home's value
RBI rules cap the loan as a share of the home's value:
- Up to ₹30 lakh: up to 90%
- ₹30 lakh to ₹75 lakh: up to 80%
- Above ₹75 lakh: up to 75%
So for a home valued at ₹80 lakh, the most a bank can lend is ₹60 lakh, even if your income allows more.
Your credit report
Your credit score affects whether you get the loan and on what terms. Paying bills on time, keeping card use low and not applying for many loans at once all help.
Adding a co-applicant
A working spouse or parent as co-applicant can add their income and raise your loan amount. Remember, both of you are then responsible for repaying.
A quick self-check
Add your existing EMIs and the new EMI you expect. If the total feels comfortable after rent, savings and daily costs, you are in a good place. If not, consider a smaller loan or a longer saving period.
A worked example: finding your real limit
Illustrative figures only. Every lender uses its own rules. Meet Priya, 29, a salaried software tester. Her take-home pay is ₹1,20,000 a month and she pays a car loan EMI of ₹12,000. She likes a flat valued at ₹70 lakh.
Many lenders cap the share of income that can go to all EMIs together. This share is often called FOIR, the fixed obligation to income ratio. We will use 50% purely to show the arithmetic.
- Income limit. 50% of ₹1,20,000 is ₹60,000 a month for all EMIs.
- Existing loans. Take away the car EMI: ₹60,000 − ₹12,000 = ₹48,000 left for a home loan.
- Turn the EMI into a loan amount. At 8.5% for 20 years, each ₹1 lakh of loan costs about ₹868 a month. ₹48,000 ÷ ₹868 is roughly 55, so the income limit allows about ₹55 lakh.
- Value limit. The flat is valued at ₹70 lakh, which falls in RBI's ₹30–75 lakh band, so the bank can lend at most 80%: ₹56 lakh.
- The smaller number wins. About ₹55 lakh. Priya needs roughly ₹15 lakh of her own money, plus stamp duty, registration and other costs on top.
If Priya closed the car loan first, her room for a home loan EMI would rise to ₹60,000. But the value limit would then cap her at ₹56 lakh anyway. This is why it pays to work out every limit, not just one.
How tenure changes the picture
For the same ₹56 lakh at 8.5%:
| Tenure | EMI (approx.) | Total interest (approx.) |
|---|---|---|
| 20 years | ₹48,598 | ₹60.6 lakh |
| 25 years | ₹45,093 | ₹79.3 lakh |
| 30 years | ₹43,059 | ₹99.0 lakh |
A longer loan lowers the EMI a little and raises the total interest a lot. Use a longer tenure to get approved if you must, then prepay when you can.
The difference between eligible and comfortable
The bank's number is the most it will lend. It is not a target. Before you accept it, ask:
- Could I pay this EMI for six months if my income stopped? An emergency fund of that size is a sensible cushion.
- Will I still be paying rent while the home is being built? If so, add the rent to your monthly outgo for those years.
- Have I kept money aside for stamp duty, registration, interiors and the maintenance deposit? Banks do not lend for most of these.
- Is there room left for insurance, retirement saving and children's costs?
What changes your number, and how much
Using the same illustrative rule and an 8.5% rate over 20 years, each ₹1,000 of monthly EMI room supports about ₹1.15 lakh of loan. That one ratio explains most of the levers you have:
- Closing a ₹12,000 car EMI frees ₹12,000 of EMI room, worth roughly ₹13.8 lakh of extra eligibility.
- Clearing a ₹5,000 personal loan EMI adds roughly ₹5.8 lakh.
- A co-applicant earning ₹50,000 take-home, with no loans, could add ₹25,000 of EMI room at a 50% ratio, worth roughly ₹28.8 lakh.
- A lower rate also helps. At 8.0% instead of 8.5%, the same EMI supports a little more loan.
The value limit does not move with any of these. If the home is valued at ₹70 lakh, the bank still cannot lend more than ₹56 lakh. Income levers raise your ceiling only until they hit that cap.
Under-construction homes: rent plus EMI
If you buy a home that is still being built, the bank releases the loan in stages as construction progresses, and you usually start paying interest on each amount released. Meanwhile, you are still paying rent. Plan for that overlap.
Illustrative figures only. If your rent is ₹25,000 and your pre-EMI interest rises over time to ₹30,000, you may be paying ₹55,000 a month in the final stretch before you move in. Ask yourself whether your budget can hold that for a year or more. If not, a ready home, or a smaller loan, may be the safer start.
Self-employed first-home buyers
If you run a business or freelance, lenders usually look at income shown in your income tax returns, often across two or three years, along with bank statements and business proof. Filing returns on time and keeping business and personal accounts separate makes your income easier to assess.
Step by step before you apply
- Download your free credit report. Each of the four credit bureaus in India must give you one free full report a year. Fix any errors first.
- Collect three to six months of salary slips, bank statements and two years of Form 16.
- Pay off small loans and card balances if you can.
- Get an in-principle figure from two or three lenders and compare the Key Facts Statement for each.
- Only then shortlist homes in that range.
Common mistakes
- Shopping first, checking eligibility later. It leads to heartbreak or a rushed loan.
- Applying everywhere at once. Each application can add a hard enquiry to your credit report.
- Forgetting the value limit. A high salary does not get past RBI's loan-to-value cap.
- Adding a co-applicant without thinking it through. They share the full liability, and their own credit record affects the loan.
- Counting on bonuses. Lenders may not count them fully, and neither should your budget.
Want to see the numbers for your own budget? Try our EMI calculator before you speak to a lender.
