Budgeting the Purchase & Home-Loan Basics

Rohan and Meera Iyer have done the hard part. In Lesson 2 · Is Buying Right for You? they decided a home was right for them; in Lesson 14 · Negotiating, the Offer & the Booking Amount they agreed a price on a specific flat — a RERA-registered, under-construction 2BHK in Bengaluru, carpet area 720 square feet, at an agreement value of ₹95,00,000 (ninety-five lakh). They have even paid a booking amount. The price is settled. What is not settled is the money behind it — and that is where the fear lives.

Three questions keep them up at night. “The bank keeps talking about a ₹72,00,000 loan — will it actually give us that?” “How big is the EMI, and will it strangle us every month for the next twenty years?” And, quietly, “We've saved ₹23,00,000 — is that even enough?” This lesson answers all three, in that order, on their real numbers — and then does the same for two very different buyers.

None of this is guesswork once you know the rules. A lender decides three things — how much of the flat it will fund (that's LTV), how much of your income may go to EMIs (that's FOIR), and how far to trust your track record (that's your CIBIL score) — and your loan is simply the smallest number those three allow. We'll take them one at a time, watch the Iyers' ₹72,00,000 assumption meet reality, then repeat the exercise for Neha, who is buying alone on one salary, and Aarti, a renter who wants to know whether she can afford to buy at all.

Loan eligibility is the bank's answer to a single question: what is the most it will lend you against this flat? It sounds like one calculation, but it is really the lowest of three separate ceilings. Miss any one of them and your “eligible” amount quietly drops — usually at the worst moment, when you have already fallen for a place.

1. The property ceiling (LTV). A bank never funds 100% of a flat. RBI caps the loan at a percentage of the property's value — 90%, 80% or 75%, depending on the price. The rest is your down payment. We unpack this in §2.
2. The income ceiling (FOIR). Your salary can only carry so much EMI. Lenders cap the share of your take-home pay that all your EMIs may eat — around 50% for salaried buyers. That sets the largest EMI, and so the largest loan, your pay-cheque supports. That's §4.
3. The record ceiling (CIBIL). Your credit score decides whether the bank approves you at all, and at what interest rate. A weak score can shrink or reject the loan, and quietly make it more expensive. That's §6.

The bank sanctions the smallest of the three. Two more things shape the income ceiling underneath the surface: your existing obligations (any EMIs you already pay reduce what's left for a new one) and your age and tenure (a 30-year-old can stretch a loan to retirement; a 55-year-old cannot, so the EMI has to be bigger). Keep the picture simple, though — for most salaried buyers of a first home, the ceiling that actually binds is the property or the cash, not the income. The Iyers are about to prove it.

Loan-to-value, or LTV, is the share of a property's value that a bank will lend against it. If a bank funds 80% of a ₹50,00,000 flat, the loan is ₹40,00,000 and the other ₹10,00,000 — the down payment you met in Lesson 2 — comes from your own pocket. The LTV is not a number you negotiate; it is capped by the Reserve Bank of India, and it steps down as the price goes up.

Here are the RBI bands in force in 2026: a loan up to ₹30,00,000 can be funded up to 90% (you put 10% down); from ₹30,00,000 to ₹75,00,000, up to 80% (20% down); and above ₹75,00,000, only up to 75% (25% down). Why does a costlier home get a smaller percentage? Because the bank wants more of your own money in the deal on a bigger risk — the more you stand to lose, the more carefully you'll repay. It is a feature, not a penalty. Watch where the Iyers' ₹95,00,000 flat lands:

The Iyers' flat sits above ₹75,00,000, so it falls in the 75% band. Seventy-five per cent of ₹95,00,000 is ₹71,25,000 — that is the most the bank will lend. But the whole plan assumed a ₹72,00,000 loan. Run the ratio: ₹72,00,000 ÷ ₹95,00,000 is 75.79%, a hair over the 75% line. So the loan is trimmed to ₹71,25,000, and the ₹75,000 difference lands back on the Iyers as extra down payment. This is exactly the kind of small surprise this lesson exists to remove — better to meet the ₹75,000 now, in a paragraph, than at the sanction desk.

The Iyers' ₹23,00,000 was earmarked as the down payment — price minus loan, ₹95,00,000 minus ₹72,00,000. Two things now enlarge that. First, the LTV trim we just saw: the loan is ₹71,25,000, so the down payment is really ₹23,75,000, ₹75,000 more. Second — and much larger — the acquisition-cost stack from Lesson 2: the taxes and charges that ride on top of every purchase and are never quoted in the flat's price. Here is the real cash the ₹95,00,000 flat asks for:

Stack it up. Down payment ₹23,75,000; stamp duty and registration at roughly 6.5% of ₹95,00,000, about ₹6,17,500 (Karnataka; the exact figure and the women-buyer angle are worked in Lesson 25 · Stamp Duty & Registration); GST at 5% on this under-construction flat, ₹4,75,000 (that's a builder's charge on an under-construction home — walked in Lesson 19 · Booking Under-Construction; a ready or resale home has none); and about ₹1,00,000 of other charges — the loan processing fee, the mortgage registration (MODT), a lawyer's title check and the first year's home insurance. The total own funds needed is ₹35,67,500 — against the ₹23,00,000 the Iyers had set aside. The gap is ₹12,67,500.

That number is the honest fear, named out loud: they are ₹12,67,500 short of the cash this flat actually needs. It is not a catastrophe — it is a knowable figure they can now plan around (save more, trim the flat, adjust timing, or family help). And it reconciles cleanly, which is how you know it's right: own funds ₹35,67,500 plus loan ₹71,25,000 equals ₹1,06,92,500 — exactly the flat's ₹95,00,000 plus the ₹11,92,500 of costs. Nothing is hidden; every rupee has a home.

So the property caps the loan at ₹71,25,000. Can the Iyers actually carry the EMI on it? That is the second ceiling — FOIR, the Fixed-Obligations-to-Income Ratio. FOIR is the share of your net monthly income that all your EMIs and fixed obligations are allowed to consume. Lenders cap it around 50% for salaried buyers: if more than half your take-home is already promised to instalments, they won't lend more. Two things to hold onto — it is measured on net (take-home) pay, not your gross salary, and it counts every EMI you already have.

The Iyers' combined income is ₹28,00,000 a year. After income tax, provident fund and professional tax, their take-home is about ₹2,00,000 a month (we'll treat that as given here; the tax detail is Lesson 30 · Income Tax on House Property). A 50% FOIR ceiling means up to ₹1,00,000 a month could go to EMIs. Their EMI on the ₹71,25,000 loan is ₹61,832 — which is 30.9% of take-home, comfortably under the ceiling, with ₹38,168 of monthly headroom to spare (the gauge in the visual above shows exactly this). Read backwards, ₹1,00,000 of EMI capacity could service a loan of about ₹1,15,00,000. The bank's LTV only allows ₹71,25,000. So for the Iyers, income is NOT the binding ceiling — the property is. Their pay-cheque could carry far more than the flat lets them borrow.

Where does the ₹61,832 come from? The EMI — Equated Monthly Instalment — is the single, level payment you make every month that covers both interest on what you still owe and a slice of the principal, sized so the loan reaches exactly zero at the end of the tenure. Early on, most of it is interest; near the end, most of it is principal. It is computed from three numbers — the loan, the rate and the tenure — by one formula:

Put in the Iyers' numbers: P = ₹71,25,000, r = 8.5% ÷ 12 ÷ 100, n = 20 × 12 = 240 months. Out comes ₹61,832 a month. (Had the bank funded the full ₹72,00,000 they first assumed, it would have been ₹62,483 — the ₹75,000 of extra loan costs about ₹651 more a month.) We're using a representative 2026 rate of 8.5% a year here; home-loan rates float and are tied to the RBI repo rate, and the machinery — fixed versus floating, EBLR, prepayment, switching lenders — is the whole of Lesson 16 · The Home Loan, in Depth.

Now the number that surprises people. Over 20 years the Iyers repay ₹1,48,39,777 in all — of which ₹77,14,777 is interest, more than the ₹71,25,000 they borrowed. That's not a rip-off; it's the arithmetic of borrowing a large sum for a long time, with interest charged on the outstanding balance every single month. And it means the tenure is a lever with two edges — stretch it and the monthly EMI falls, but the lifetime interest swells. Watch:

Going from 20 to 25 years shaves ₹4,460 off the monthly EMI — real breathing room — but adds ₹23,71,952 to the interest over the life of the loan. Going the other way, to 15 years, costs ₹8,331 more each month but saves ₹22,10,492 in interest. There is no free lunch: a smaller EMI is a bigger total. Choose the shortest tenure whose EMI you can comfortably carry, and remember you can usually prepay later to shorten it (Lesson 16).

The third ceiling is your record. A CIBIL score is a three-digit number from 300 to 900, built by the credit bureau TransUnion CIBIL from how you've repaid past loans and credit cards — on time, late, or not at all. Lenders read it as shorthand for how likely you are to repay. Broadly they want 750 or above; roughly four in five home loans are sanctioned to borrowers scoring above 750. The score does two jobs at once, and the second one is the one people miss.

The first job is the gate: a low score can get a loan declined, or shrunk. The second is the price: even when you're approved, a weaker score buys you a higher interest rate — and on a loan this size, that is worth lakhs. Watch what the same ₹71,25,000 loan costs across the bands:

Same loan, same twenty years — only the score changes. At an excellent 800-plus, a ~8.4% rate gives an EMI of ₹61,382. Slip to the 650–699 band and the rate climbs to around 10.5%, and the EMI jumps to ₹71,135 — about ₹9,750 more every month. Over the full term that's roughly ₹23,40,000 of extra interest, paid for nothing but a weaker record. The score you build in the years before you buy quietly sets the price of the home you buy.

Now line the three ceilings up. LTV caps the loan at ₹71,25,000. FOIR would allow an EMI supporting about ₹1,15,00,000 — far more, so income has room to spare. CIBIL, assuming the Iyers have kept a clean record, approves them at the best rate. The smallest ceiling wins, and here it is the property: the loan is ₹71,25,000, the EMI ₹61,832, and approval is not in doubt. On paper, the flat is well within reach.

So what actually stands between the Iyers and the keys? Not their income, and not the bank's willingness — it's cash. They need ₹35,67,500 of their own money and have ₹23,00,000. The binding constraint is the ₹12,67,500 gap, and the fix is not to borrow more (they can't — LTV caps it) but to close that gap: save the difference, choose a slightly cheaper flat, lean on a longer tenure to free up monthly cash for saving, or accept help. That is a plan, not a panic.

Neha Gupta is 31, single, and works in Noida on ₹18,00,000 a year. She has found a ready-to-move 2BHK for ₹62,00,000 and wants to buy it alone. Her fear is the one many single buyers carry: “Will a bank even give me a home loan without a co-applicant, on one salary?” The rules don't care whether there are one earner or two — they care about the same three ceilings. Run them.

LTV: at ₹62,00,000, Neha's flat is in the ₹30,00,000–₹75,00,000 band, funded up to 80%. That's a ₹49,60,000 loan and a ₹12,40,000 down payment. FOIR: her take-home is about ₹1,25,000 a month, so the 50% ceiling is ₹62,500. Her EMI on ₹49,60,000 at 8.5% over 20 years is ₹43,044 — 34.4% of take-home, with ₹19,456 of headroom. Her income could actually support a loan of about ₹72,00,000; she needs only ₹49,60,000. She qualifies comfortably, on one salary, with no co-applicant. The answer to her fear is simply: yes.

Her cash need is lighter than the Iyers', for one big reason: her flat is ready, not under construction, so there is no GST at all. Stamp duty and registration in Uttar Pradesh run about 7% — roughly ₹4,34,000 (and a woman buyer typically gets a stamp-duty concession there; see Lesson 25) — plus about ₹1,00,000 of other charges, for ₹5,34,000 of costs. Add the ₹12,40,000 down payment and she needs ₹17,74,000 of her own funds. She has around ₹18,00,000 saved — so, unlike the Iyers, she just clears the bar.

The Iyers and Neha started from a flat and asked what the bank would give. The wiser question — especially before you've fallen for a place — runs the other way: start from what you can carry, and let it tell you the price you should be shopping at. The method is a chain. Take your net income, apply the FOIR ceiling to get the largest EMI you can hold, convert that EMI into the largest loan (using the per-lakh shortcut), then add the down payment your savings can cover — and that sum is your ceiling. Aarti is the perfect test.

Aarti Deshpande is 24, renting a 1BHK in Pune at ₹22,000 a month on an income of ₹11,00,000 a year. She isn't sure buying is even on the table, and she's saved about ₹8,00,000. Her take-home is roughly ₹85,000 a month. A 50% FOIR gives a maximum EMI of ₹42,500, which at 8.5% over 20 years supports a loan of about ₹48,97,000. On income alone, Aarti could carry a nearly ₹49,00,000 loan — which sounds like plenty.

But the chain has a second link, and for Aarti it's the one that bites. A loan needs a down payment plus costs, and those come from savings. Her ₹8,00,000 stretches only far enough to put the down payment and charges on a home of about ₹30,00,000 — where a 90% LTV keeps the down payment to ₹3,00,000, leaving room for ~₹3,10,000 of stamp duty and fees. That home carries a ₹27,00,000 loan and a ₹23,431 EMI — almost exactly her current rent — at a gentle 27.6% FOIR. So Aarti's ceiling isn't set by her salary at all; it's set by her savings. Cash, not income, is her wall.

And here the honest read matters more than the arithmetic. A ₹30,00,000 budget buys very little in Pune, and stretching her ₹8,00,000 into it would leave her with no cushion at all. The numbers point, gently, back to Lesson 2 · Is Buying Right for You?: for Aarti right now, renting and building the deposit is very likely the rational move. This is education, not advice — the calculator gives her the figures; the decision, and the life around it, are hers.

There's a way to learn your real number before you shop, rather than at the sanction desk after you've committed: a pre-approval, also called a sanction-in-principle. You apply to a bank up front; it verifies your income and pulls your CIBIL, and issues a letter stating an amount it is willing to lend you, under stated assumptions, usually valid for three to six months. It runs the FOIR-and-CIBIL side of the three ceilings ahead of time, so you shop with a real budget instead of a hope.

Why bother before you've chosen a flat? Two reasons. It stops you falling for something you can't fund. And it is leverage — the negotiating strength from Lesson 14: a builder or seller takes a pre-approved buyer far more seriously than a “still arranging finance” one, because you can close quickly. But be clear about what the letter does not promise:

1. It is not final sanction. The specific property still has to clear the bank's legal and technical (valuation) checks — and the loan is only ever as big as the LTV on that flat allows. Pre-approved for ₹60,00,000, but the flat you pick is ₹70,00,000 above the ₹75,00,000 line? The 75% LTV, not your letter, sets the loan.
2. It is not disbursal. Money is released only against the registered agreement and — for an under-construction flat — against construction stages (the disbursal mechanics and pre-EMI are Lesson 19 · Booking Under-Construction).
3. It can lapse or change. If it expires, or your income, obligations or CIBIL shift, or rates move, the number moves with them. A pre-approval is a strong indication, not a locked cheque.

The sanction letter itself — the real document, read box by box — is walked in Lesson 16 · The Home Loan, in Depth. And if your profile is tricky (self-employed, irregular income, a thin or low CIBIL file), pre-approval works differently for you; that's Lesson 17 · Home Loans for Tricky Cases.

The most common home-loan harm isn't a stranger stealing your money — it's being nudged, politely, to borrow right up to your limit, so that a job loss or a rate rise later tips you over. Around that core danger sit a few outright scams. Learn the tells once and they're easy to spot.

The thread running through all four is the same: a number pushed up, or a fee demanded up front. An agent who says “you're eligible for ₹1,15,00,000 — take the bigger flat” is handing you a ceiling as if it were advice (§7). Anyone offering to inflate the on-paper agreement value so the loan covers your down payment is proposing an illegal cash deal that breaks your reconciliation and follows you to resale and tax time. A “loan approved — pay ₹4,999 processing fee” message is not how real banks work; a genuine fee is deducted by the bank itself on a real sanction. And no one — no agent, no “consultant” — can fix your CIBIL score for money. The safe posture is boringly effective: borrow within a comfortable FOIR, deal with the bank branch directly, and never pay a fee for “guaranteed approval.”

Maybe you're reading this a little late. Maybe you already stretched to the top of your FOIR and the EMI now frightens you every month. Or maybe an “agent” took a processing fee for a loan that never appeared, and then stopped answering. First, set the blame down. The whole system is built to move you toward the maximum — the bigger the loan, the bigger everyone's cut — and the fee scams are polished precisely because they work on careful people. Feeling foolish is the tax; it isn't the truth.

Now, what you can still do. If the EMI is too heavy, you have levers: ask your lender to extend the tenure, which lowers the monthly payment straight away (at the cost of more total interest — §5); prepay whenever a bonus or windfall lands to shrink the balance (floating-rate home loans to individual borrowers carry no prepayment penalty under RBI rules for loans on or after 1 January 2026 — the detail is Lesson 16); and once you've been paying cleanly for a year or two, look at a balance transfer to a lender offering a lower rate (also Lesson 16). If you paid a fee to an agent who vanished, that's not a dead end either — report it, both to get a chance at your money and to stop the next person being caught. That's the next section.

None of this is beyond recovery. A too-big EMI can be re-shaped; a lost fee can be reported; a tight year can be survived. You are not the first buyer to be pushed too far, and the tools to climb back are real and in your hands.

When something goes wrong with a loan or a lender, the recourse runs in a ladder — start at the bottom rung and climb only if you must:

1. The lending bank's grievance cell, first, in writing. Most disputes — a wrong charge, a mis-sold add-on, a delayed sanction — are meant to be resolved here, and you need this on record before you escalate.
2. The RBI Banking Ombudsman, free, if the bank doesn't resolve it in 30 days or you're unhappy with the reply. File through the RBI's complaint-management portal (cms.rbi.org.in). It covers banks and most NBFCs and costs nothing.
3. The cyber-crime channels, for a loan-agent, fake-approval or fee fraud: the national portal cybercrime.gov.in, or the helpline 1930 for a fresh financial fraud, and your local police / Economic Offences Wing. Move fast — early reporting improves any chance of recovery.
4. A consumer forum, for deficiency in service by a bank or intermediary, where the harm is a service failure rather than a crime.

How much loan will I actually get?

The lowest of three numbers: the LTV cap on the flat (90/80/75% by price band), what a 50% FOIR on your take-home supports, and what your CIBIL allows. Compute all three; the smallest is your loan. For most first-home buyers it's the LTV or the cash, not the income, that binds.

What's a good CIBIL score for a home loan?

Aim for 750 or above — that's where about four in five home loans are sanctioned, and where the best rates live. Below ~700, expect a higher rate; below ~650, expect a bank to decline. Check yours free once a year and fix errors before you apply.

How big should my EMI be?

Comfortably under the 50% FOIR ceiling — ideally around 35–40% of take-home, so a bad month doesn't break you. The bank's limit is not your target. The Iyers sit at 31%, which is why their loan is easy to carry.

Why do I need a bigger down payment above ₹75 lakh?

Because RBI's LTV cap drops to 75% above ₹75,00,000, so the bank funds three-quarters and you bring a quarter. Below ₹30,00,000 you'd bring only 10%; between ₹30 and ₹75 lakh, 20%. The costlier the home, the more of your own money the rules require in it.

Is my income counted gross or net for FOIR?

Net — your take-home pay after tax, PF and professional tax. Budgeting off your gross salary is the classic mistake; the bank uses the money that actually reaches your account, and so should you.

Longer tenure or shorter?

A longer tenure lowers the monthly EMI but raises the total interest a lot — the Iyers pay ₹23,71,952 more interest at 25 years than at 20. Pick the shortest tenure whose EMI you can comfortably carry, and prepay later to shorten it further.

Can I get a home loan on a single income?

Yes — the rules test the same three ceilings whether there are one earner or two. Neha qualifies alone on ₹18,00,000 a year with room to spare. A co-applicant can raise your capacity by pooling incomes, but it isn't required.

Should I borrow the maximum the bank offers?

No. The maximum is the most the bank will risk on your income — a ceiling, not a recommendation. Borrow for the flat you want and the cash you have, not for the number a calculator lights up. An agent pushing the maximum is a warning sign, not a favour.

Does a pre-approval guarantee the loan?

No. It confirms what your income and CIBIL support, but the specific flat still has to clear the bank's legal and valuation checks, the loan is capped by that flat's LTV, and the letter can lapse or change. It's a strong indication and real negotiating leverage — not a locked cheque.

Are stamp duty and GST part of the loan?

No. LTV is on the flat's value only; stamp duty, registration, GST and fees come entirely from your own funds, on top of the down payment. Budget them separately — roughly 7–8% for stamp duty and fees, plus ~5% GST if the flat is under construction.

Everything in this lesson is in one interactive below. In “Can I afford this home?” you put in a price, your take-home pay, any existing EMIs, your savings, a tenure and a rate, and it shows the LTV-capped loan, the EMI, your FOIR, and the real cash needed — flagging whether you're comfortable, tight, or short. In “How much home can I afford?” it works backwards from your income and savings to the ceiling you should be shopping at. It's pre-filled with the Iyers, with one-tap presets for Neha and Aarti.

Load each learner and watch which ceiling binds — the property for the Iyers, comfortable income for Neha, savings for Aarti — then clear it and put in your own numbers. The lesson lands when you can see, at a glance, not just what the bank might lend, but what you can actually carry and cover. That gap between the two is the whole of budgeting a purchase.

The load-bearing words from this lesson, in one place.