FOIR Explained: How Fixed Obligation Ratio Affects Your Home Loan
FOIR (Fixed Obligation to Income Ratio) is the single most important metric that determines how much home loan you qualify for. If you don't understand it, you may apply for the wrong amount and get rejected — damaging your credit score.
What is FOIR?
FOIR = Total Monthly EMI Obligations ÷ Gross Monthly Income × 100
Banks determine your maximum eligible home loan EMI based on this formula:
Max New EMI = (Gross Income × FOIR %) − Existing EMIs
Example Calculation
- Monthly gross income: ₹1,00,000
- Existing car loan EMI: ₹12,000/month
- Bank's FOIR limit: 45%
Max total EMI allowed: ₹1,00,000 × 45% = ₹45,000
Max home loan EMI: ₹45,000 − ₹12,000 = ₹33,000
Max loan (8.5% rate, 20yr): ₹33,000 → approximately ₹34 lakh
FOIR Limits Across Major Banks
| Bank | Typical FOIR Limit | Notes |
|---|---|---|
| SBI | 50–55% | Higher for high-income borrowers |
| HDFC Bank | 45–50% | Depends on income level |
| ICICI Bank | 40–50% | Varies by credit score |
| LIC Housing Finance | 40–45% | Conservative approach |
| Bajaj Housing Finance | 50–60% | More flexible for high incomes |
How to Improve Your FOIR
- Close existing loans: Pay off car loan or personal loan before applying. Each closed loan frees up EMI capacity.
- Add co-applicant income: Spouse's income is counted separately, increasing the combined gross income for FOIR calculation.
- Reduce credit card limits: Some banks count credit card limits (not just outstanding) as obligations. Request limit reductions.
- Time your application: Apply after your year-end bonus has been credited and salary increment has taken effect.
Rental Income and FOIR
If you earn rental income, banks may count 50–75% of it toward your gross income for FOIR calculation. This can significantly improve your eligible loan amount. Maintain 2 years of ITR showing rental income for this to be considered.