How banks work out your home-loan eligibility, and why two lenders quote different amounts

Rules and rates as of 12 October 2026.

Ask two lenders how much they will lend you against the same salary slip and you can get answers lakhs apart. Neither is wrong. A home-loan sanction is the smaller of two ceilings: one set by your income, which is mostly lender policy, and one set by the property's value, which is set by the Reserve Bank of India (RBI). Once you know how each is built, you can predict the number before you apply.

Ceiling one: what your income can carry

Lenders start with your monthly income and ask what share of it can go towards loan repayments in total. That share is the fixed obligation to income ratio, or FOIR. If a lender works at 50% FOIR and you take home ₹1,00,000 a month, it is comfortable with total EMIs of ₹50,000, including any EMIs you already pay.

No RBI rule sets a FOIR number. It is internal credit policy, and it varies by lender, income band, employer category and product. The percentages used below are illustrative assumptions, not any lender's published policy. What RBI does require, in its 18 August 2023 circular on floating-rate resets, is that lenders take repayment capacity into account at sanction so there is "adequate headroom" if the EMI or tenure later has to rise. That is one reason lenders do not lend up to 100% of your income.

The steps are the same everywhere:

1. Income: usually net monthly salary for salaried borrowers. Some lenders count variable pay, rent received or a co-applicant's income; others leave some of it out.
2. Existing obligations: EMIs on car, personal, education or consumer loans. Many lenders also add a notional amount for credit-card balances, often a small percentage of the outstanding, even if you pay the card in full. Treatment differs by lender.
3. EMI capacity = income × FOIR − existing obligations.
4. Loan amount: the EMI capacity is turned into a principal using the lender's rate and the longest tenure it will allow for your age and retirement date.

The conversion in step 4 is the EMI formula run backwards:

Loan = EMI × ((1 + r)n − 1) / (r × (1 + r)n), where r is the annual rate ÷ 12 and n is the number of monthly instalments.

Ceiling two: what the property supports

RBI caps the loan-to-value (LTV) ratio for individual housing loans from banks. Under the Master Circular – Housing Finance dated 1 April 2025, the caps depend on the loan amount:

• Loans up to ₹30 lakh: up to 90% of the property value.
• Above ₹30 lakh and up to ₹75 lakh: up to 80%.
• Above ₹75 lakh: up to 75%.

The same circular says banks should not add stamp duty, registration and other documentation charges to the property cost when computing LTV, except for homes costing ₹10 lakh or less. So on most city flats, those charges come out of your own pocket. The circular also ties these slabs to the risk weights banks apply (35% or 50%), which affects how much capital a bank sets aside for your loan. Banks may lend below these caps; they may not lend above them.

A worked example: one borrower, two lenders

Take a salaried borrower with net monthly income of ₹1,50,000. She pays a car EMI of ₹15,000 and carries a credit-card balance that both lenders, in this example, count as a notional ₹3,000 a month. Her existing obligations are therefore ₹18,000. She is looking at a flat with an agreement value of ₹1.1 crore.

The two lenders below are hypothetical. Their rates are built as the repo rate of 5.50% plus an assumed spread: 2.40 percentage points for Lender A and 2.90 for Lender B. Home loans from banks have been linked to an external benchmark such as the repo rate since 1 October 2019, under the RBI circular of 4 September 2019.

Lender A (FOIR 50%, 7.90%, 20 years): EMI capacity = ₹1,50,000 × 50% − ₹18,000 = ₹57,000. With r = 0.079/12 and n = 240, each ₹1 lakh of loan costs about ₹830 a month, so ₹57,000 supports a loan of about ₹68.66 lakh.

Lender B (FOIR 60%, 8.40%, 25 years): EMI capacity = ₹1,50,000 × 60% − ₹18,000 = ₹72,000. With r = 0.084/12 and n = 300, each ₹1 lakh costs about ₹798 a month, so ₹72,000 supports about ₹90.17 lakh.

LTV cap on the ₹1.1 crore flat: both figures are above ₹75 lakh, so the 75% cap applies: ₹82.5 lakh.

Item	Lender A	Lender B
FOIR (assumed)	50%	60%
Rate (repo 5.50% + spread)	7.90%	8.40%
Tenure	20 years	25 years
EMI capacity after ₹18,000 obligations	₹57,000	₹72,000
Income-based maximum loan	₹68.66 lakh	₹90.17 lakh
LTV cap (75% of ₹1.1 crore)	₹82.50 lakh	₹82.50 lakh
Eligible loan (lower of the two)	₹68.66 lakh	₹82.50 lakh
Own funds needed for the agreement value	₹41.34 lakh	₹27.50 lakh
EMI on the eligible loan	₹57,000	₹65,876
Total interest over the tenure	₹68.14 lakh	₹1.15 crore

Figures computed by IndianHomebuyer; stamp duty, registration and fees are extra in both columns.

Lender B's higher quote is income-driven, and the LTV rule then trims it. Lender A is limited by income alone. The gap of about ₹13.8 lakh comes from three things moving together: a higher FOIR, a longer tenure and a different rate. Note that the cheaper rate produced the smaller eligibility here, because the shorter tenure and stricter FOIR outweighed it. The larger loan also costs about ₹47 lakh more in total interest, a trade-off the eligibility figure alone does not show.

Two other levers change the picture. If the car loan were closed before applying, obligations would fall to ₹3,000 and Lender A's income-based maximum would rise to about ₹86.7 lakh, at which point the LTV cap, not income, would bind. And if Lender A allowed 25 years instead of 20, its figure would rise to about ₹74.5 lakh with the same FOIR.

Why quotes differ in practice

• FOIR bands: many lenders allow a higher share at higher incomes.
• What counts as income: bonuses, incentives and rental income are counted in full, in part or not at all.
• What counts as an obligation: card balances, loans you have guaranteed and EMIs ending in a few months are treated differently.
• Tenure: the maximum is usually capped by your age at maturity, and a few extra years add lakhs to eligibility.
• Rate used for the calculation: some lenders assess at a buffer above the offered rate to cover future resets.
• Property valuation: LTV is applied to the lender's assessed value, which can be lower than your agreement value.

What to compare once you have offers

For loans sanctioned on or after 1 October 2024, RBI's Key Facts Statement circular of 15 April 2024 requires banks and housing finance companies to give a standardised Key Facts Statement (KFS). It must include the annual percentage rate (APR), which covers interest and all charges, plus a full repayment schedule. A charge not shown in the KFS cannot be levied later without your explicit consent. Comparing APRs and total interest across KFS documents is a more complete comparison than the headline eligibility figure.

For your own case, the loan officer at each lender, or a qualified financial planner, can explain how a particular lender treats your income and obligations.