Buying a Home? Clear These 5 Financial Tests First

Ankur, a 29-year-old IT engineer, was living his dream last year. A good salary, a stable job, and a brand-new ₹72 lakh flat in Gurgaon — everything looked perfect.
But nine months later, after an unexpected job loss, his dream home became his biggest stress.

This is not just Ankur’s story , it’s the story of thousands of young Indians rushing into homeownership without proper financial planning.
Buying a home is not just a dream move; it’s a financial test.

Today, banks tell you “You’re eligible for ₹65 lakh”, brokers tell you “Only 5 units left”, and your mind says “Let’s do it.”
But once EMIs start, even a small income hiccup can push your finances and peace of mind , off track.

So before you take that big step, make sure you pass these 5 Financial Tests.

1: Is Your EMI-to-Income Ratio Below 30%?

Banks often tell you how much loan you qualify for, but not how much you can actually afford.

Experts recommend keeping your EMI below 30% of your monthly income. Beyond that, you’ll struggle to manage daily expenses, bills, and savings.

A 2025 report by The Economic Times revealed that one in three salaried Indians spend over 40% of their income on EMIs. In Mumbai, that number rises to 48%.

Even though interest rates have dropped recently, don’t get lured by “smaller EMIs.”
Lower EMIs often mean longer loans — and more total interest.

2: Do You Have an Emergency Fund?

Ask yourself one question: If you lose your job tomorrow, how long can you pay your EMI?

According to ET Wealth, 1 in 3 salaried employees don’t have any emergency fund. That’s a financial red flag — especially if you’re planning a 15–20-year loan.

Experts advise keeping at least 6 months of expenses in a liquid fund or savings account.
Start small — even ₹200 a day becomes ₹72,000 in a year.

Without an emergency buffer, one unexpected event — like a job loss or medical emergency — can push you into debt overnight.

3: Have You Compared Rent vs Buy Logically?

Many people believe paying ₹33,000 EMI is smarter than ₹26,000 rent. But that ₹7,000 difference hides a bigger truth.

Buying a home comes with huge upfront costs — down payment, registration, interiors — which can easily reach ₹18–22 lakh, as reported by LiveMint.

Also, the resale market isn’t always kind. A CNBC report showed resale listings rising 40%, as many owners struggle to find buyers at their expected prices.

Yes, tax benefits under Section 80C or PMAY are nice, but they hardly cover the emotional and financial strain of a ₹60–70 lakh loan.

Ask yourself:
Are you buying a home for long-term stability or short-term social validation?

Ankur’s Story: When a Dream Home Becomes a Debt Trap

After a promotion and a wedding engagement, Ankur’s family encouraged him to buy his own flat.
His rent was ₹45,000 — EMI for a ₹72 lakh flat was ₹51,000. “What’s ₹6,000 more?” he thought.

He had no savings left after the down payment and interiors. Three months later, his company laid off 140 employees, including him.
With no emergency fund and no backup income, he had to sell his flat at a 30% loss — losing both money and mental peace.

Ankur’s words sum it up perfectly:
“I don’t regret buying a house. I regret not being financially ready.”

4: Do You Have a Plan B?

Before taking a 20-year loan, ask — Is your income stable for the next 5 years?

Job insecurity is real. Even tech giants like Google, Meta, and TCS have been laying off employees. In 2025, TCS announced plans to cut 12,000 jobs — proof that no one is truly “safe.”

That’s why a secondary income source is no longer optional. Freelance work, side business, or investments — something must back you up if your main income stops.

A loan is fixed.
Your income isn’t.
Always plan for “What if?”

5: Are You Buying Under Emotional Pressure?

Social media and family expectations often push young people into buying homes early.

Your cousin’s housewarming reel, your parents’ advice, and your broker’s “last unit left” pitch — all create artificial urgency.

Business Today reported how builders time new project launches during appraisal seasons to trigger impulsive purchases.

Don’t buy a house to impress others.
Buy when you’re financially — and mentally — ready.

Final Takeaway

Buying a home is one of the biggest milestones in life — but only when done right.

Before signing any loan document, take this 5-point financial fitness test:

✅ EMI is under 30% of your income
✅ Emergency fund covers 6 months of expenses
✅ Income is stable for the next 5 years
✅ You have a backup plan
✅ You’re buying for yourself, not under pressure

Remember, EMIs aren’t just numbers.
They represent years of commitment — and mental load.

Learn from Ankur’s story. Take your time. Plan your finances. And only then , buy your dream home.

FAQs

1. What percentage of income should go into home loan EMI?
Ideally, your EMI should not exceed 30% of your monthly income. This helps you manage other expenses and maintain savings comfortably.

2. How much emergency fund should I have before taking a home loan?
At least 6 months of your living expenses (including EMIs) should be saved in a liquid or easily accessible fund.

3. Is buying better than renting in India right now?
Not always. Consider your job stability, city, and long-term plans. In many metros, renting is financially wiser if property prices are too high.

4. What happens if I lose my job after taking a home loan?
You must continue paying EMIs. If you default, banks can initiate recovery actions. Having insurance or an emergency fund can prevent stress.

5. How do I know if I’m buying under emotional pressure?
If your decision is influenced by relatives, social media trends, or limited-time offers — pause. Evaluate your readiness and finances first.

Disclaimer

The information shared in this blog is for general awareness only. Every individual’s situation may differ, and the actual process or outcome can vary based on personal and legal circumstances.