How lenders decide your eligibility
Two methods typically decide your maximum loan, and lenders usually offer you whichever is lower:
- FOIR method — Fixed Obligation to Income Ratio. Lenders allow your total EMIs (existing + new) to consume roughly 40-50% of your monthly income, then reverse-calculate the maximum loan from that EMI capacity.
- Income-multiplier method — a simpler rule of thumb, roughly 5 times your annual income, adjusted for age and existing obligations.
Your credit score, employment stability, and the property's own legal clearance also factor into both the eligible amount and the interest rate you're offered.
Documents lenders will ask for
- Income proof — salary slips and Form 16 (salaried) or ITRs and audited financials (self-employed)
- Bank statements, typically the last 6 months
- Identity, address and PAN documents
- The property's title documents, approved plan and, for under-construction projects, the RERA registration
- Existing loan statements, if you have any ongoing EMIs
Fixed vs floating interest rates
Most home loans in India are floating rate, linked to the lender's repo-linked lending rate (RLLR), which moves with RBI policy rate changes. Floating rates are typically lower to start but carry the risk of rising over the loan's tenure. True fixed-rate loans for the full tenure are less common and usually carry a rate premium in exchange for certainty.
How to actually compare loan offers
- Compare the effective interest rate, not just the headline rate — processing fees and other charges affect the real cost
- Check prepayment and foreclosure charges — RBI rules mean floating-rate loans to individuals generally can't carry prepayment penalties, but verify this in writing
- Look at the lender's typical processing time and disbursement flexibility, especially for under-construction properties with staged payments
- Ask about the reset frequency if the rate is floating — how often it's revised based on RBI policy moves
Does prepaying actually help?
Yes — prepayment reduces your outstanding principal, which cuts total interest paid and can shorten your tenure meaningfully, particularly when done in the earlier years while interest still forms the bulk of your EMI.
Frequently asked questions
How much home loan am I eligible for?
Lenders typically use either a FOIR (Fixed Obligation to Income Ratio) method — your EMI capacity based on income minus existing obligations — or an income-multiplier method (roughly 5x your annual income), and offer you the lower of the two. Use our Home Loan Eligibility Calculator for an estimate.
What documents do banks need for a home loan?
Income proof (salary slips/ITRs), bank statements (usually 6 months), identity and address proof, the property's legal documents, and for self-employed applicants, business proof and audited financials.
Fixed or floating interest rate — which is better?
Floating rates track the market and are usually lower initially but can rise; fixed rates lock in certainty but at a premium and are less common for the full tenure in India. Most Indian home loans are floating, linked to the lender's repo-linked lending rate.
Does prepaying my home loan actually help?
Yes, significantly — prepayment reduces the outstanding principal, which cuts the total interest paid over the loan's life and can shorten the tenure considerably, especially if done in the earlier years of the loan. Use our EMI Calculator's prepayment option to see the exact saving.