Are you financially prepared before buying your dream home?
But before I begin, please note that these are thumb rules being conservative.
Of course, depending on your financial situation and the city you live in, you can stretch the thumb rules and make a better judgement for yourself.
So, moving on:
How much debt lender will give:
1. Fixed obligation to revenue ratio (FOIR)
Let’s consider this example to understand FOIR better:
You have an revenue of ₹ 35,000 per month; a car debt installment of ₹ 5,000
That is, he pays a total of ₹ 5,000 per month for all his active financial obligations.
Using this FOIR formula:
FOIR calculation= [Sum of Existing Fixed Obligations /Monthly Income] X 100
= 5,000/35,000 x 100
= 14.28%
The FOIR is less than 50%
Now, if he applies for a home debt, the banks will be comfortable giving up to 35% more.
(Please note: FOIR varies from lender to lender and from case to case, but on average, it should be between 40% to 55%.)
2. 3-30-30 Thumb Rule
For example, say you earn Rs. 70,000 a month. This brings your gross annual revenue up to Rs. 8,40,000. In that case, here’s how the rule applies.
– Keep your EMIs within Rs. 21,000 per month (30% of Rs. 70,000).
– Look for homes that cost around Rs. 25 lakhs (3 X Rs. 8,40,000).
– Have around Rs. 7,50,000 (30% of Rs. 25 lakh) saved up in cash and cash equivalents, so you can meet down payment needs easily.
This rule is particularly important to avoid overshooting your financial plan!!
So, follow these rules to make it easier for you to buy a home!!
#anushkarathod #financial #home #homeloan #thumbrules
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