Thumb Rule to Consider while Buying a House on Home Loan

Thumb Rule to Consider while Buying a House on Home Loan

If you are planning to buy property, there is no better time than now! The interest rates on loans are on a multi-year low, as well as real estate prices. As exciting as these times are for prospective homebuyers, getting a home loan is still a big financial decision. 

Here are a few thumb rules to make homebuying easy.

The price of the property you’re buying

When you are house-hunting, take the price of the property into account. This price will determine the loan amount you will apply for. Usually, big loans can stretch for a long time if you opt for lower EMIs. 

So, a good rule of thumb is to keep the loan amount roughly five times your annual income. This way, you can choose a relatively shorter loan tenure and pay off the loan early.

Apply the 35/50 rule

Financial institutions check your monthly financial liabilities by evaluating your debt-to-income (DTI) ratio. Here, if 45-50% of your monthly salary is being used to repay your current EMIs, your DTI ratio is high. This reduces your loan approval chances.

Besides clearing your pending dues, opt for a home loan with an EMI of not more than 35% and keep the total EMI amount less than 50% of your monthly income. 

Use a home loan EMI calculator to get hold of your potential EMIs. This will leave you with enough monthly funds to finance other goals.

Your CIBIL score

Your credit or CIBIL score reflects your creditworthiness and loan repayment ability. So lenders meticulously check your credit history and credit scores to gauge your financial fitness. Here, a score of over 750 is considered good. 

Before approaching your lender, don’t forget to check your CIBIL score. What’s more, with an excellent credit score, you can get a more competitive loan offer with attractive interest rates.

Opt for a short loan tenure

A long loan tenure may work wonders for your EMIs by reducing them. However, it doesn’t help with the home loan interest rate amount. These grow larger over time, requiring you to pay hefty premiums on your loans. If your goal is to reduce the interest costs, and you can afford to pay a slightly larger EMI, choose a short loan tenure.

Read MoreList of Required Documents for Taking Home Loan

Consider a joint housing loan

Planning for a loan also includes checking your preferred lender’s home loan eligibility criteria and fulfilling it. The criteria comprise CIBIL score, monthly income, current debt, etc. 

Here, you can apply for a joint housing loan to qualify for a bigger loan amount and bag lucrative interest rates. If you and your spouse are working professionals, you can easily get a higher loan amount with your incomes clubbed together. 


Buying a house is a huge decision that requires extensive financial planning. Besides looking for competitive home loan interest rates, you must consider your property’s cost, monthly income, CIBIL score, and a suitable tenure to comfortably repay the loan. Consider the points mentioned above before embarking on your homebuying journey, and you’ll get a good deal. 

Happy house-hunting