One of the prime desires of almost all of us is to have our own ‘home sweet home’. However, with a regular rising in the real estate price, owning a home is becoming very difficult. This is where money-lending organisations come into action. Home loans can make one’s dream come true. If one works in an organization and has a decent annual salary package, then getting a home loan is much easier. However, a self-employed home loan needs more hoops than a regular one.
Before applying for a home loan for a self-employed, understanding the basics is necessary. Almost all banks and housing finance companies offer home loans to self-employed. However, home loan interest rates and home loan tenure can differ from salaried people.
Difference between self-employed home loans and regular home loans
For a self-employed professional, getting a home loan is tough in comparison to a salaried individual. Every salaried individual is treated as a much safer borrower as verifying the income, savings and expenses is easy.
However, for self-employees like freelancers, business owners, shopkeepers, chartered accountants, etc., the income flow is not fixed. Therefore, their credit score might be lower. Furthermore, self-employed home loan borrowers have to go through extensive loan application procedures.
These include a much deeper check of income tax return records, title deeds and lease documents etc.
Home loan eligibility criteria for self employed
Usually, self employed individuals worry about the scrutiny their home loan application will face. After all, they do not have a steady income like a salaried one. However, nowadays home loan eligibility criteria for self-employed are simple and easy to meet.
- The borrower needs to be a residing citizen of the country.
- Self-employed applicants need to be between 22-60 years. However, a younger applicant is much more eligible as they will have more time to repay the debt.
- Applicant should have a good credit score of 750 or higher.
- The borrower’s yearly income needs to meet the lender’s income guidelines.
- The business should be running for at least three years.
Improving home loan eligibility
If one is not eligible to get a home loan, then there are a few ways to improve eligibility. These include-
- Maintain a credit score of 750 or above. A higher credit score shows that the borrower has a high repayment capacity.
- Research the lender properly before selecting one. Proper research will help the borrower to understand the lender’s requirements and policies.
- Choose a longer tenure. It increases home loan eligibility as the EMI account is lower. Therefore, timely payments will be easy to make.
- Add a financial co-applicant. This will not only enhance the primary amount that is needed to be borrowed but also reduce the debt.
However, the residential and identity criteria are not something that one can improve. But, before that users should know how to calculate home loan eligibility online and how it may affect interest rates and other factors before applying for home loan.
Home loan documents required for self employed
To process a self-employed housing loan there are certain documents most lenders typically want to see. Apart from the ID documents and information on assets and liabilities, there are some other documents required. These include-
- Proof of identity – Copy of Aadhaar card, voter card and passport, driving license
- Residential proof – Copy of Aadhaar card, voter card, latest telephone and electricity bills
- Address proof for business – Trade license certificate. Establishment certificate, PAN card, the Title deed of the company, SSI registration certificate, VAT registration
- Proof of income – Income tax return for last 3 years, profit and loss statements and balance sheet, personal saving account statement for last 6 months
- Life Insurance Policy
- Credit Card Statements for the last three months
In the case of self-employed home loans, apart from all these some lenders can also ask for some additional documents.
Most financial institutions extend pre-approved offers with secure credit instruments such as loan against property and home loans. These offers fasten the whole loan application stage. Eligible candidates can check their pre-approved offers by providing a few details on the lender’s website.
Before opting for any self-employed home loan remember to check the home loan EMI calculator to get an idea of the EMI and total payable amount. Furthermore, the credit score of the borrower should be higher to make the loan lending procedure a smoother one.