What Is FOIR and How Lenders Use It

FOIR — the fixed-obligation-to-income ratio — is the share of your net monthly income already committed to EMIs and fixed obligations. Lenders cap it (commonly around 50–60%) so that a new loan won’t stretch you too far. Whatever headroom is left below the cap, after your existing EMIs, is the new EMI you can take on — and that EMI decides how big a home loan you qualify for.

How the cap becomes a loan amount

The logic runs in three steps. First, your income times the FOIR cap gives your maximum total EMI. Second, subtract your existing EMIs to get the affordable new EMI. Third, convert that EMI into a loan amount at the going rate and tenure — the reducing-balance formula run in reverse.

Worked example. On a net income of ₹1,00,000 with no other EMIs and a 50% cap, you can afford about ₹50,000 of EMI, which supports a home loan of roughly ₹57,61,542 over 20 years at 8.5%. Add an existing ₹15,000 EMI and your headroom drops to ₹35,000 — and the eligible loan falls to about ₹40,33,079. Try your own numbers below.

Why existing EMIs hurt so much

Because the cap is on total obligations, every rupee of existing EMI comes straight off your home-loan headroom. That’s why clearing a small personal or car loan before you apply can lift your eligibility by several lakh. It’s also why lenders look closely at your credit report — undisclosed EMIs change the picture.

The other limit: LTV

FOIR is only half the story. The lender also caps the loan as a fraction of the property’s value — the loan-to-value ratio — so you must arrange the rest as a down payment. Your final sanction is the lower of the FOIR-based amount and the LTV-based amount. See down payment, LTV and what you actually need to arrange, and how to improve your eligibility for the levers that help. Figures here are indicative — confirm with the lender.