What is FOIR (fixed obligation to income ratio)?
Also called: FOIR, debt-to-income ratio, EMI to income ratio, DBR
FOIR is the share of your monthly income that goes on loan EMIs and other fixed commitments, including the new home loan. Lenders use it to decide how large an EMI, and therefore how big a loan, you can carry, usually allowing 40% to 60% depending on income.
The sum is simple. Add up every EMI you already pay (car, personal loan, education loan, the minimum due on a credit card if the lender counts it) plus the proposed home loan EMI, and divide by your net monthly income. Salaried applicants are assessed on take-home pay after tax and PF; self-employed applicants on income shown in their returns, often an average of two or three years.
Each lender sets its own ceiling. A person earning ₹40,000 a month might be held to 40% or 45%, while someone earning ₹3 lakh might be allowed 60%, since more money is left for living costs. Banks also add a margin for rate changes, so the amount you're quoted by one lender may be quite different from another's.
FOIR, not your salary, is often what limits your loan. A buyer with an ₹18,000 car EMI can lose ₹20 lakh or more of eligibility. Closing a small personal loan before applying, or adding an earning co-applicant who co-owns the property, can change the result more than haggling over the rate.
It's worth running the numbers yourself. If a lender approves an EMI that leaves you less than you need for rent, school fees and savings, the approval isn't advice. Banks assess risk to them, not your comfort.
A Hyderabad software engineer takes home ₹1.2 lakh a month and pays a ₹15,000 car EMI. At a 50% FOIR the bank allows ₹60,000 of total EMIs, leaving ₹45,000 for the home loan, which supports about ₹56 lakh at 7.5% over 20 years.
Applicants forget that credit card dues and small consumer loans count. A ₹3,000 phone EMI with eight months left can knock lakhs off your eligibility; close it before you apply.
Questions people ask about FOIR (fixed obligation to income ratio)
Is rental income counted when calculating FOIR?
Many lenders count part of it, often 50% to 70%, if it's shown in your tax return and backed by a registered rent agreement.
What FOIR is considered safe for a borrower?
As a personal rule, keeping all EMIs below about 40% of take-home pay leaves room for expenses and savings, even if a bank would allow more.