Your eligibility and amount of home loans are evaluated using simple parameters given below. You can also find out your eligible home loan amount approximately.
Every Bank in India has its own policies and standards to evaluate the amount of home loan you are eligible for. It is known as credit appraisal process.
Using this process a bank can decide on your loan eligibility.
You repayment of home loan installments depends on the following criteria :
Your eligibility of loan varies from bank to bank for which every Indian bank has its own guidelines and policies. Using these parameters your maximum eligible loan amount is calculated.
Banks use the following banking parameters to find your eligibility.
This is the ratio of your fixed obligation to your income. Fixed obligation includes all of your monthly installments of other loans previously availed, including your home loan applied for.
This Fixed obligation does not include salary deductions for provident fund, insurance premium and any recurring deposits.
Example :
Your monthly Income : Rs : 50,000
If the bank is having 30% FOIR, then your total loan repayments (fixed obligations) per month shall be 30% of your monthly income (30% x Rs. 50,000 = Rs. 15,000)
If a bank is offering 50% FOIR then it will be 50% x Rs.50,000 = Rs.25,000
Let us assume that a bank is giving 50% FOIR, means you can have fixed obligation up to Rs. 25,000
Out of this Rs. 25,000, if you have a monthly Car and furniture loan repayment of Rs 10,000. Then, your proposed home loan monthly installment will be Rs. 15,000 (Rs. 25,000 minus Rs. 10,000)
LTV and LCR are used to evaluate the loan amount as per values of the property. Although you may be eligible for a higher loan amount as per your income or other parameters. You are eligible for a maximum loan of the value of the property. This may be usually between 70% and 90% of the registered value of the property.
This is one of the important parameter to evaluate your loan amount, generally expressed in percentage. It shows the portion of your monthly installment in home loan. It will be between 33.33% and 40%. Following example can help you to understand better.
Example:
Your Gross monthly income : Rs 1 Lakh
As per this, you are eligible for a loan where your installment repayment should not exceed Rs 40,000 per month.
The above mentioned 3 parameters (FOIR, LTV/LCR and IIR) are mainly used by our Indian Banks to calculate your home loan value.
The final approved home loan value will be the lowest value derived among the 3 parameters.