Home Loan: How much home loan can you get from a bank based on your income? Find out here...

Buying a home is everyone's dream, but to fulfill that dream, it's important to know how much a bank will lend you based on your income. To understand home loan eligibility, you need to understand two things:

First, are your income and credit score suitable for a loan?
Second, how much loan can you get based on your income?
Two important things: Net Income and Income Stability

1. Net Income: Your Take-Home Salary

The gross salary listed on your salary slip is not your actual income. The amount of money that comes into your account after deductions like PF, taxes, and insurance is your net income. The bank uses this net income to determine how much EMI you can comfortably pay each month.

If your net income is ₹1 lakh per month (i.e. ₹12 lakh annually), the bank can typically approve a loan of ₹45 to ₹50 lakh.

2. Income Stability
The bank doesn't just look at your salary, but also at how stable it is. If you have a regular job at a reputable company, the bank's confidence is higher. However, if you're a freelancer or consultant, the bank is a little more cautious.

How Loan Eligibility is Determined
According to SBI Reality's blog, banks typically use several multipliers to estimate the loan amount:

Gross Eligibility Multiplier
This is often around 4 times your annual income. Meaning, if you earn ₹1 lakh per month, your annual income is ₹12 lakh. Based on this, banks may be willing to give you a maximum loan of up to ₹50 lakh. However, this is the maximum limit they can offer.

Net Eligibility Factor
Assume that 25% of your gross income is deducted for taxes, PF, and group insurance. In such cases, the multiplier is usually set to 6 times, taking all other factors into account. For example, if your net salary after PF, TDS, and group insurance is ₹9 lakh per annum, a bank can offer you a loan of around ₹4.8 million to ₹5.4 million in a best-case scenario.

EMI and Disposable Income
Finally, a general rule of thumb is that your home loan EMI should not exceed 40% of your disposable income (the income you have left after expenses and taxes). In the example above, if your net monthly disposable income is ₹45,000 per month, you would be offered a loan with approximately the same EMI, which would be equivalent to a loan of ₹4.5 million to ₹5 million for 15-20 years.

How to Increase Loan Eligibility
Add a Co-Applicant – If your spouse has a stable income and a good CIBIL score, adding them as a co-applicant can increase your loan amount.
Clear Old Loans – If you already have an existing personal loan or car loan, clearing it will increase your EMI capacity.
Maintain a good CIBIL score – Banks offer better interest rates and higher loan limits with a 750+ score.
Show Assets – If you have assets like property, gold, or fixed deposits, you can increase your loan limit by mortgaging them.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.