How much foir is Good: – Have you ever applied for a home loan at a bank and wondered, “All the documents are in order, yet why is the bank offering a lower loan amount or rejecting the loan?”
Actually, the answer lies not in your CIBIL score,
but in a small number called FOIR (Fixed Obligation to Income Ratio).
The bank meticulously analyzes your entire loan application,
and FOIR is the ratio that determines how much loan you will receive, or whether you will receive it at all.
So today we’ll discuss—
👉 “How much FOIR is good?”
👉 “Is a higher FOIR better or worse?”
👉 “Is a higher or lower FOIR better?”
Let’s understand this in simple terms with a simple example and real-life understanding.
What is FOIR – Explain it in simple terms.
FOIR stands for Fixed Obligation to Income Ratio, which means the portion of your monthly income that is already going towards an EMI or loan.
👉 Formula:
FOIR = (Total Monthly Obligations ÷ Gross Monthly Income) × 100
That is, if your monthly income is ₹60,000 and you are already paying an EMI of ₹15,000,
then FOIR = (15,000 / 60,000) × 100 = 25%
This means that 25% of your income is already going towards a loan.
📊 Now the question – “How much FOIR is good?”
This varies from bank to bank, but
generally, a good FOIR is considered to be between 40% and 50%.
👉 Salaried Applicants: 40%–50%
👉 Self-Employed Applicants: 45%–55%
👉 Joint Home Loan Applicants: Up to 55% acceptable
This means that if your monthly income is ₹1 lakh,
then the bank wants your Existing EMI + New EMI = ₹50,000 to not exceed ₹50,000.
Is a higher FOIR better or worse?
Many people think that “the higher the FOIR, the better the loan,”
but the reality is the opposite!
👉 Higher FOIR = Worse Situation
Because it means a large portion of your income is already being spent.
👉 Lower FOIR = Better Financial Health
Because it shows your repayment capacity.
Example:
There are two people – Rahul and Mohit.
Both earn ₹1 lakh.
Rahul’s EMI is ₹25,000 (FOIR = 25%)
Mohit’s EMI is ₹60,000 (FOIR = 60%)
Who is stronger?
👉 Rahul, because he has enough margin for repayment.
Mohit will have a higher risk of loan rejection.
Is a higher or lower FOIR better?
👉 The obvious answer – a lower FOIR is always better!
But a very low FOIR (less than 20%) is also not ideal,
as it suggests you haven’t fully utilized your eligibility.
Best FOIR Range:
➡️ Between 40% and 45% is considered ideal.
This gives the bank confidence that you’ll be able to pay EMIs on time,
and you won’t be overburdened.
Why do banks rely so heavily on FOIR?
Because for banks, FOIR is a “Repayment Strength Indicator.”
Just as a doctor assesses a patient’s condition by listening to their heartbeat, banks assess a borrower’s financial stability by looking at FOIR.
- If FOIR is high → High risk for the bank
- If FOIR is controlled → Reliable borrower for the bank
Therefore, FOIR is the first filter of a loan policy.
What are the reasons for high FOIR?
Sometimes FOIR becomes high because:
- Multiple personal loan or credit card EMIs are ongoing.
- Short-term loans are taken, resulting in higher EMIs.
- Income proof is not updated.
- Joint family expenses are not taken into account.
How to Reduce FOIR – Practical & Tested Tips
1. Close Existing Loans:
If you have smaller loans remaining, pay them off in full first.
2. Extend Loan Tenure:
Increasing the loan term will reduce EMIs and improve FOIR.
3. Add Joint Applicants:
If both spouses work, take a joint home loan.
4.Increase Income Sources:
Showing incentives, rent, or side income is a way to improve FOIR.
5. Compare Interest Rates:
Lower interest = Lower EMI = Better FOIR.
FOIR vs. CIBIL Score – Which is more important?
Both are important but play different roles:
| Factor | Indication | Bank Decision |
|---|---|---|
| CIBIL Score | – Whether you are credit-responsive or not | – Builds trust |
| FOIR | – Your repayment capacity. | – Determines the loan amount. |
👉 If both CIBIL + FOIR are strong then loan approval is almost certain.
Final Conclusion
Taking out a loan isn’t a big deal,
but understanding your financial health is. The FOIR is the mirror that tells you whether you can handle the EMIs.
So, remember—
High FOIR = Risky Future 💸
Good FOIR = Secure Home Loan 🏡
If you want to buy your dream home, first understand the FOIR, manage it, and then apply.
Because the right FOIR is the “magic key” to unlocking your loan approval 🔑💙
Calculate your FOIR for free now — Home Loan FOIR. Com