How to Calculate Home Loan Eligibility?

Financial institutions have predetermined criteria to gauge the creditworthiness of a borrower, known as eligibility criteria. These criteria typically include factors such as the applicant's age, income stability, and credit history, among others. Meeting these criteria demonstrates the borrower's ability to repay the loan and influences the terms and conditions of the loan approval, including the loan amount and interest rate. Before you apply for housing loan, you should be aware of the Home Loan eligibility criteria set by your lender, to improve your chances of approval. Calculating your Home Loan eligibility based on your income and financial obligations can be helpful.

It is helpful for applicants to know how to calculate loan eligibility based on income and obligations. One of the primary factors that affects your eligibility is your FOIR, i.e., Fixed Obligation to Income Ratio. This ratio represents how much of your income goes towards serving existing obligations, such as other loans, thereby indicating how much of your income is free to service your Home Loan EMIs.

With the following example, you will understand how Home Loan eligibility is calculated manually.

Suppose you're earning Rs.80,000 per month and have no financial liabilities. Assuming that you wish to apply for a Home Loan at an interest rate of 7.99%* p.a. with a repayment tenure of 30 years, your FOIR will be:

FOIR = Home loan eligibility = Your monthly savings / (EMI per lakh x 1 lakh)

EMI per Lakh for a loan tenure of 30 years at 7.99%* p.a. interest rate is Rs.751.

Home loan eligibility = (50% of 80,000 – 0) / (751 x 1,00,000) = Rs.53,259,658

So, with a monthly income of Rs.80,000 and a loan tenure of 30 years at an interest rate of 7.99%* p.a., you would be eligible for a maximum loan amount of Rs.53,259,658.

You can also check your Home Loan eligibility with the help of our Home Loan Eligibility Calculator.

All you need to do is:

• Select your city of residence from the list.
• Enter or select your date of birth using the calendar.
• Fill in or use the slider to enter your monthly income.
• Enter or use the slider to enter your monthly obligations.

The calculator will display the approximate loan amount you will be eligible for.

Also Read: Learn How to Increase Home Loan Eligibility

As stated earlier, your ability to qualify for a Home Loan depends on various factors, including income stability, credit score, age, and FOIR. Let us understand these in detail.

• Stable Income: Lenders evaluate the stability of your income to ensure that you can meet the loan repayment requirements. They consider income from sources such as salary or rental income.
• Age: The age of the applicant plays a significant role in determining the suitable term for a Home Loan. Younger applicants may get the benefit of a longer repayment tenure.
• Credit Score: A credit score is an indicator of the borrower's creditworthiness based on their credit history. Your credit history reflects your repayment behaviour, outstanding debts, and credit utilisation. Lenders typically offer favourable terms on Home Loans to applicants with a credit score above 750.
• FOIR: The Fixed Obligation to Income Ratio (FOIR) is used to evaluate an individual's repayment capacity. FOIR is calculated by comparing one's monthly income to fixed monthly expenses such as rent and EMIs.

*Terms and conditions apply.