Bank will consider your Net income while calculating the eligibility for total home loan amount.

Normally, all banks provide home loans up to 60 times your monthly net income. However, your credit appraisal and loan eligibility is largely based on your profile and your savings.

To determine what you can afford, consider these factors:

Monthly Income The first thing you need to know is exactly how much money you bring in each month. This includes your salary and any other sources of income, such as investments. You can also add income of your spouse or close family member to enhance the total income. Your total income is the baseline for figuring out how much you can afford to pay for home loan each month.

Debt Payments If you have existing debts, then part of your monthly income is already spoken for. Figure out how much you need to spend per month to service any other debts you have, such as personal loans, car loans, or credit card debt.

Other Expenses Of course, debt payments aren’t your only expense. You also need to cover other needs like food, utilities, childcare, and transportation. Banks usually don’t ask about these expenses when considering you for a loan. Look at your household budget and figure out how much of your monthly spending goes toward necessities you can’t cut. If you don’t have a budget, this is a good time to make one, since you’ll probably need it as a homeowner.

Savings A final monthly expense is money you want to save. For instance, if you’re setting aside funds every month to save for retirement or already are investing towards child’s policy, that’s another chunk of your income that you can’t put toward housing.

Available Funds Affording a house isn’t just a matter of meeting the monthly payments. You also need to have enough cash on hand to cover the down payment and closing costs. The amount you pay up front will also affect the monthly payments. If you can afford a large down payment, you won’t need to borrow as much for your home loan, which will lower your EMIs (monthly payments). On the other hand, if the amount you have saved up isn’t enough for a down payment of at least 20%, you will probably have to look at alternatives like projects approved under subvention schemes.

Look at all your available funds, such as savings and investments, and figure out how much you can spare to put toward your home purchase.

Credit Rating Finally, you need to consider your credit score. If you have very good or excellent credit – that is, a Credit score of at least 750 – you will qualify for the best interest rates on your home loan, which will keep your EMIs low. On the other hand, if you have fair to poor credit – no better than 700 – you are likely to pay higher rates, raising your EMIs.