750 credit score, Rs 24 lakh salary, yet no home loan: What went wrong?

For a 36-year-old IT professional in Bhubaneswar, buying a house seemed well within reach. Earning Rs 24 lakh a year and carrying a credit score of 750, the borrower approached a lender for an Rs 80 lakh home loan, confident that the numbers would work in their favour.But the bank did not think so.The problem was not the salary or the credit score. It was the pile of existing EMIs. With nearly Rs 1 lakh already going towards loan repayments every month, the borrower simply did not have enough money left to take on another big-ticket commitment.And this is where the home loan dream hit a wall. WHEN EXISTING EMIs EAT INTO YOUR TAKE-HOME SALARYThe numbers tell an interesting story.The IT professional earned a gross monthly salary of Rs 2 lakh, taking home around Rs 1.55 lakh. However, existing loan repayments were already consuming Rs 1 lakh every month, leaving just Rs 55,000 for household expenses and everything else. Now consider the proposed home loan of Rs 80 lakh. At an assumed interest rate of 8.5% for 20 years, the monthly EMI would work out to approximately Rs 69,400.Add that to the existing EMIs, and the total monthly repayment obligation would jump to Rs 1.69 lakh. That's nearly Rs 14,400 more than the borrower's entire take-home salary, even before accounting for groceries, utility bills, transport and other everyday expenses.On paper, the borrower looked like a strong candidate for a home loan. In reality, there was barely enough money left each month to accommodate another EMI."Having an excellent credit score, steady income, and a strong repayment history are often considered indicators of a borrower's creditworthiness. But there's a lot more to it than just that," says Kundan Shahi, Founder of ZAVO, a loan settlement and repayment platform.Shahi explains that lenders look beyond repayment history to assess existing financial commitments, disposable income, property valuation and whether another EMI can comfortably fit into the borrower's budget.YOUR CREDIT SCORE IS NOT YOUR HOME LOAN TICKETMany prospective homebuyers spend months building their credit scores before approaching a bank. Paying credit card bills on time, avoiding defaults and maintaining a healthy credit history are all important. But a good score does not automatically translate into home loan approval.A credit score reflects how responsibly a person has handled credit in the past. It does not, by itself, establish whether they can afford another EMI today.Adhil Shetty, CEO of BankBazaar, says several factors go into a home loan approval, including income stability, employment history, age, property value and existing monthly liabilities.A borrower earning Rs 1 lakh a month but already paying close to Rs 60,000 in EMIs, for instance, may not have enough income left to service another loan, even with a strong credit score."The deciding factor is not just how much the borrower earns, but how much remains after existing EMIs to service the new loan," Shetty says.Mehernosh Tata, MD and CEO of Godrej Housing Finance, also points out that a good credit score is only one part of the assessment.“Lenders also look at income stability, existing financial obligations and repayment capacity. Someone may have an excellent repayment history but still have financial commitments that leave limited room for another EMI,” Tata says.He adds, “Ultimately, the objective is to ensure that the loan is affordable for the customer over the long term.”THE EMI-TO-INCOME RATIO: THE NUMBER BANKS WATCH CLOSELYThis is where the Fixed Obligation to Income Ratio (FOIR), commonly used by lenders to assess a borrower's repayment capacity, comes into play.Simply put, it measures how much of a borrower's monthly income goes towards existing and proposed loan repayments. The idea is to ensure that enough money remains after EMIs to cover regular household expenses and unexpected financial needs.Suresh Venkatesan, Whole-time Director and CEO of CRIF Credit Information Services, says lenders commonly keep this ratio in the range of 40% to 55% of income, although the exact limit varies across lenders. Lower-income borrowers may face tighter limits.Lenders may also test affordability at a slightly higher interest rate to check whether the borrower can manage repayments if rates rise. Tata points out that there is no single EMI-to-income threshold applicable across all lenders. What matters is whether the repayment remains manageable throughout the loan tenure.YOUR CAR LOAN AND CREDIT CARD DUES MATTER TOOA home loan application is not assessed in isolation. Every existing financial commitment can affect how much a borrower is eligible to take on.A car loan, personal loan, education loan, consumer durable EMI or even a buy-now-pay-later facility can reduce the amount a bank is willing to lend.Credit card outstanding balances and repayment patterns are also examined. High credit utilisation or several recently opened credit lines could raise concerns about a borrower's financial position.Venkatesan says even guarantees and co-signed loans can be considered because the borrower may become responsible for repayment if the primary borrower defaults.So, even if every EMI has been paid on time, having too many loans running simultaneously can work against a prospective homebuyer.A STABLE JOB AND GOOD SALARY MAY STILL NOT BE ENOUGHA lender also needs to be confident that the borrower's income will remain dependable over the loan tenure.For salaried applicants, employment history, recent job changes and consistency of earnings matter. A recent switch does not automatically lead to rejection, but lenders may seek additional information to establish income stability. Variable pay may also be assessed differently from fixed monthly earnings.To verify income, banks typically examine salary slips, bank statements, Form 16 and income tax returns. For self-employed applicants, financial statements, tax returns and GST records, where applicable, help establish business performance and cash flows.Shetty says lenders cross-check declared income against bank statements and other records. Significant discrepancies can trigger further queries or reduce the loan amount a borrower qualifies for.Banking habits matter as well. Frequent cheque bounces, regular overdraft usage, consistently low account balances or unexplained cash deposits may raise questions about financial stability.SOMETIMES, IT IS NOT YOU BUT THE PROPERTYEven if a borrower has a healthy credit score, stable income and sufficient repayment capacity, a home loan can still be rejected because of the property.Lenders examine ownership records, legal clearances, approved building plans, property valuation and the builder's track record before approving a loan.Tata says unclear ownership records, incomplete approvals, legal disputes or differences in property valuation can affect approval.The loan amount is also linked to the property's assessed value. Venkatesan says lenders may not finance the entire amount sought if it does not align with their valuation and lending criteria.WANT THAT HOME LOAN? START BY REDUCING YOUR DEBTA rejection need not mean the end of the home-buying plan. But applying to another bank without addressing the underlying problem may not help.Venkatesan suggests closing smaller loans and clearing credit card balances to free up monthly income. Keeping credit utilisation low and avoiding fresh loans or credit card applications in the months before applying can also improve the overall credit profile.Borrowers can consider increasing their down payment and seeking a smaller loan, which would bring down the EMI. Adding a co-applicant with a stable income is another option to improve eligibility.It is equally important to check the credit report for errors, including old loans that may still be shown as active.For the IT professional in Bhubaneswar, a Rs 24 lakh annual salary and a credit score of 750 were not enough to secure an Rs 80 lakh home loan. The reason was simple: too much of the monthly income was already committed to existing loans.It is a reminder that a good salary and a healthy credit score may make you look like an attractive borrower, but they do not guarantee that a bank will lend you the amount you want.Because sometimes, the biggest obstacle between you and your dream home isn't your credit score. It's the debt you already carry.- Ends