How much home loan can you get in India?
- 13 Mar 2025
How much home loan can you get in India?
Buying a home is one of the biggest financial decisions in life, and for most people in India, a home loan is the key to making this dream a reality. However, before applying for a home loan, it is essential to understand how much you can borrow, what factors affect your eligibility, and how to maximize your chances of approval.
The loan amount you are eligible for depends on multiple factors, including your income, credit history, financial obligations, and the bank’s policies. By understanding these factors and planning your finances wisely, you can secure the best possible home loan deal. In this guide, we will explore how banks determine loan eligibility, key factors that influence your borrowing capacity, and strategies to increase your home loan amount.
How Banks Determine Home Loan Eligibility
Before approving a home loan, banks and financial institutions conduct a detailed evaluation of your financial profile. This assessment ensures that you have the ability to repay the loan without financial strain. The primary factors that banks consider include:
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Income Level: Your monthly salary or business income plays a crucial role in determining the loan amount. Generally, lenders approve loans where the EMI does not exceed 40-50% of your monthly income.
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Repayment Capacity: Banks assess your ability to manage loan payments alongside your existing expenses. If you have multiple loans or high monthly obligations, your home loan eligibility may decrease.
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Credit Score: A credit score above 750 improves your chances of getting a higher loan at lower interest rates. If your credit score is low (below 650), lenders may either reject your application or charge higher interest rates.
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Loan-to-Value Ratio (LTV): Banks usually finance 75-90% of the property's value, requiring you to pay the remaining amount as a down payment.
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Employment Stability: Salaried employees working in stable jobs, especially with reputed companies or government organizations, have a higher chance of loan approval. Self-employed individuals must provide income proof, business records, and IT returns.
Understanding these factors can help you plan better before applying for a loan and increase your chances of approval.
How Much Home Loan Can You Get?
The home loan amount you can get depends primarily on your income and financial profile. Banks typically follow a general rule: your Equated Monthly Installment (EMI) should not exceed 40-50% of your net monthly income.
Here’s an estimate of how much loan you can expect based on your monthly income:
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If you earn ₹50,000 per month, you may get a loan of approximately ₹30-35 lakh.
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If you earn ₹1,00,000 per month, your loan eligibility can go up to ₹60-70 lakh.
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For a property worth ₹1 crore, banks may offer a loan of ₹75-80 lakh, with the remaining amount to be paid as a down payment.
However, these numbers vary based on your credit score, existing loans, and the lender’s policies. Banks also consider additional factors like job stability and debt obligations before finalizing the loan amount.
If you have a strong financial profile, some lenders may offer up to 90% of the property value as a loan. On the other hand, if you have existing loans or a lower credit score, your eligibility may decrease.
Factors Influencing Home Loan Eligibility
A. Your Credit Score
Your credit score is a crucial factor that determines both your loan amount and interest rate. A high credit score (750 and above) increases your chances of securing a larger loan at better interest rates, while a low score can result in loan rejection or higher interest costs.
To improve your credit score:
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Always pay your credit card bills and EMIs on time.
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Avoid applying for multiple loans within a short period, as it can negatively impact your score.
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Maintain a low credit utilization ratio (below 30% of your total credit limit).
B. Your Income and Job Stability
A stable job with a consistent income stream assures banks that you can repay the loan. Salaried professionals working in MNCs, government sectors, or reputed private companies have higher loan eligibility. Self-employed individuals need to show a steady income history, usually supported by income tax returns (ITR) and business financial statements.
C. Existing Liabilities and Expenses
If you already have other loans, such as a car loan or personal loan, banks consider these obligations while calculating your home loan eligibility. Your Debt-to-Income (DTI) ratio should ideally be below 50% to qualify for a higher loan amount. Clearing existing loans before applying for a home loan can improve your eligibility.
D. Loan Tenure
A longer loan tenure can increase your eligibility as it reduces the monthly EMI burden. For example, choosing a 25-30 year loan tenure instead of 15-20 years can allow you to borrow a higher amount. However, longer tenures mean you will pay more interest over time.
E. Co-Applicant for the Loan
Adding a co-applicant, such as a spouse or parent, can improve your loan eligibility. If your co-applicant has a stable income and good credit score, the lender may approve a larger loan amount.
Ways to Increase Home Loan Amount
If the loan amount offered by the bank is lower than what you need, there are several strategies to increase your eligibility:
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Apply for a Joint Loan: Adding a co-applicant with a stable income can increase the loan amount.
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Opt for a Longer Loan Tenure: Choosing a 25-30 year tenure reduces your EMI burden and increases eligibility.
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Clear Existing Debts: Paying off credit card dues and personal loans can improve your Debt-to-Income ratio.
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Improve Your Credit Score: Ensure your credit score is above 750 before applying.
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Choose a Bank Offering a Higher LTV: Some banks may offer up to 90% of the property value, increasing the loan amount.
Planning ahead and taking these steps can significantly improve your chances of getting a higher loan.
Conclusion: How to Plan Your Home Loan Smartly
Getting a home loan is a long-term financial commitment, and it’s crucial to plan your finances wisely to avoid future financial stress. Here are some key points to keep in mind:
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Save for a Larger Down Payment: The more you pay upfront, the lower your loan amount and EMI burden.
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Choose the Right Lender: Compare different banks and NBFCs to find the best interest rates and terms.
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Maintain a Good Credit Score: A strong credit profile ensures better loan terms and faster approvals.
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Consider Future Financial Stability: Ensure that you can afford the EMI even if your income fluctuates.
By carefully evaluating your finances and making informed decisions, you can secure a higher loan amount with better interest rates while maintaining financial stability.
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