I contacted a public sector bank for taking a home loan. When I enquired about the eligibility criteria, the customer care executive told me that they can offer maximum 50% FOIR. Though they explained it to me, I didn’t get the term. What is FOIR?
FOIR (Fixed Obligations to Income Ratio) is a popular parameter which banks use to determine loan eligibility. As per bank’s eligibility criteria, the borrowers should restrict all their fixed obligations including the currently applying loan EMI to 50% of his monthly income. Or in other words, considering that 50% of your income is required for your living, banks would see that all your monthly loan obligations / liabilities should be only 50% of your monthly income.
If the calculated ratio is more than the bank’s benchmark, ie ( 50% here), then the bank would restrict the applying loan amount in a way that including the current EMI, your monthly liabilities would come within 50% of your monthly income.
To put it in a simple way, say suppose if your monthly income is Rs.50000/- and you have other loans with EMI 15000. In this scenario, bank would approve you a loan which EMI would be maximum 10000 (if they mentioned FOIR as 50%).
FOIR ratio vary from bank to bank and from case to case, but on an average it would be with 40% to 55%
JFYI, few banks offers 60% FOIR for an individual who has done master’s degree e.g. LIC housing finance.
Yes. most banks offer up to 60% FOIR or even more in some cases for professionals. Though some banks advertise that they go up to 60% FOIR for master degree holders, it will not happen in reality if you don’t have a stable job in an MNC or a government job. But if you are a professional ( for example- a doctor), you will get 60% FOIR. Established entrepreneurs also get 60% and above based on the transactions they have wit the bank and their company financials.This vary a lot and is subject to the discretion of credit managers
ICICI BANK will provide 60% FOIR for salaried as well as for Self Employed.
They go for combined LTV up to 125% for Self employed in that case if your valuation is good you will get more than 60 % FOIR.
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Your loan eligibility is usually calculated by applying Fixed Obligations to Income Ratio (FOIR). This is the ratio of your loans to your income. Most banks restrict FOIR to a maximum of 45%-50% of the borrower’s monthly income. That means, considering that one needs around 45%- 50% of their income for their personal expenses, all fixed obligations including the Home Loan applied for, should be restricted to a maximum 45%-50% of his gross monthly income. The loan amount sanctioned is often calculated as below:
Loan Eligibility = Gross monthly income * 45%-50% – all other obligations
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Axis bank offers upto 70% foir depends on monthly net salary.
Below 20,000 = 60% foir
Upto 1,00000= 65% foir
Above 1,00000= 70% foir