Being self-employed has its perks. You get to enjoy the fruits of your hard work without reporting to any higher authority. Self-employment is definitely the path to choose if you want to keep your entrepreneurial spirits up. However, traditionally self-employed loan applicants have struggled to get their loans approved compared to their salaried counterparts. Lenders can easily verify the employment and income details of a salaried applicant. However, a self-employed person must establish these details on their own.
However, most home loan lenders are now open to offering home loans to salaried and self-employed applicants. The eligibility and documentation needs of a self-employed person may vary from that of a salaried applicant. If you are a self-employed person planning on purchasing a house, here’s how you can proceed with the documentation and other details.
Business documents required
To boost your home loan eligibility, make sure that you have the required business documentation in place.
As proof of business, lenders generally accept the Income Tax Returns for the last two or three years. A business profile on the official letterhead is also accepted as proof of business existence. You can also furnish the registration certificate of your business commencement as business proof. In case of proprietorship concern, it can be a Trade License, while in case of a partnership and companies, it will be the registration certificate issued by the Registrar of Partnerships/Companies.
The income proof documentation required from self-employed applicants is different from that of salaried applicants. A self-employed applicant can furnish a Profit and Loss Projection statement for the last three years. Alternatively, the bank statement of the last six months for the operative bank account would also reflect the income of the applicant. If the applicant has availed of cash credit or overdraft facilities, the six months’ statement of the same must be produced.
The applicant’s income may influence their home loan interest rates and repayment capacity. Therefore, if you have any other sources of income, it is worthwhile to disclose the same while applying for the home loan.
The lender may also ask for the processing fee to be paid from the business account.
Other documents that will be required while applying for the home loan include the following:
- Age proof that can be met with documents like passport, driving license, life insurance policy, birth certificate, PAN, high school leaving certificate, etc.
- Photo identity can be established by furnishing documents like Voter ID, Aadhaar, driving license, PAN card, etc.
- Address proof documents like a utility bill, bank statement, property tax receipt, property registration documents, Voter ID, etc., need to be furnished.
The lender may also ask for details of any existing loan if any. Additional liabilities may be considered by the lender while deciding the home loan eligibility of the applicant.
Are all self-employed people eligible for a home loan?
A self-employed applicant for a home loan must be within a certain age limit. This age limit varies from lender to lender. The CIBIL score of the applicant must ideally be 750 or above. Besides, the self-employed applicant must have a minimum period of experience in their current field of occupation. This period is three years in the case of most lenders.
After checking whether you meet the home loan eligibility criteria, assessing your EMI affordability on a home loan EMI calculator, and preparing the business documents, you are ready to apply for the home loan. All you need now is a lender who offers you competitive home loan interest rates and can be a trusted partner in your home buying effort.