ayush gupta
The home loan approval process often seems complicated for those who do not have adequate income. This is why salaried individuals who work in a reputed organisation and get a good salary package can get a home loan without much difficulty.
However, it becomes complex for self-employed individuals like chartered accountants, doctors, lawyers, etc. This is because lenders often doubt their repaying capacity due to a lack of a regular source of income.
So, individuals who want to qualify for self employed home loans should continue reading further to know everything about it.
Home Loan Eligibility Criteria for Self-Employed
Unlike salaried individuals, self-employed individuals do not have a steady stream of income. This is why they often get worried about the scrutiny process. But nowadays, the process of getting self-employed home loans has become seamless.
The applicants need to meet certain home loan eligibility requirements to avail of the credits against it. These eligibility criteria are based on some parameters like the applicant’s income, age, credit score, property value, and employment status.
Thus, a self-employed individual must meet the following eligibility criteria:
- He or she must be a citizen of India.
- He or she must be aged between 25 and 70 years.
- The applicant should have proof of business continuity of a minimum of 5 years in their existing enterprise.
Apart from these basic criteria, there might be some additional qualification requirements that an applicant must meet. This includes the applicant’s overall financial position, income, entrepreneurial ability, etc. However, these additional requirements differ from lender to lender.
Self-employed ones are eligible for a home loan application, either individually or jointly. Also, all the proposed property owners must have to be co-applicants.
Home Loan Documents Required for Self-Employed
While applying for a home loan, an applicant or co-applicant must submit the following list of documents to get approval. These are:
- A duly filled and signed loan application form
- Proof of residence like Voter card, Aadhaar card, Property tax receipts, Passport, Utility bills, Driving license, or Bank account statements.
- Proof of identity like Voter card, Aadhaar card, or Passport.
- Property-related documents like property allotment letters, title deeds, etc.
- Proof of income like IT returns or current account statements. This might vary depending on the applicant’s profile. Salaried applicants need to submit the latest salary slips for the last 3 months, whereas self-employed applicants need to submit their Profit & Loss statements.
- Proof of the existence of business only for self-employed individuals. The applicants need to submit proof of their business existence for a minimum period of 5 years.
In addition to this, the borrowers might have to submit certain additional documents during loan application. These documents might vary from one lender to another.
Key Factors Affecting the Home Loan Interest Rates
Check out the list of factors that impact the interest rates on home loans.
- Type of interest rate
The type of interest rate that an applicant opts for matters a lot in deciding the total interest that one needs to pay during the entire home loan tenure. When an individual opts for a flexible interest rate, lenders usually charge them a considerably lower interest rate than that of a fixed one.
However, in a situation where the lending rates might rise in the future, it will be a wise idea for home loan borrowers to opt for a fixed interest rate.
- Property condition and location
The location, condition, and value of the property are other major factors that affect home loan interest rates. If the property is located in a surrounding that has good infrastructure and a lot of amenities available nearby, then lenders provide them with a competitive interest rate.
However, if the property’s condition is not that good and is located in an odd location, then lenders might charge them a higher interest rate.
- Financial stability of the applicants
The present financial status of an applicant determines their loan repaying capacity. Thus, this is another factor that helps lenders in deciding the home loan interest rate. Self-employed individuals who possess a stable income usually get a loan at a competitive interest rate.
Thus, an applicant’s income and job security hugely impact their repaying ability. So, they are offered a loan at a low interest rate.
- CIBIL score
The applicant’s CIBIL score is an important consideration when deciding the interest rate on the home loan. This is because it depicts the borrowers’ creditworthiness. Usually, an individual with a CIBIL score of 750 or more is considered as reliable and lenders provide them with a competitive interest rate.
Thus, self-employed individuals should try out different methods to improve their CIBIL scores.
- Repayment tenor
If the home loan is taken for a shorter tenor, then lenders treat them as low-risk borrowers. Thus, they provide them with loans at a low interest rate, even though EMIs might be higher.
Some NBFCs in India provide pre-approved offers based on your credit score. Borrowers can avail these on various financial products like home loans, LAP, etc. The entire home loan application process gets streamlined. Willing borrowers can submit their names and contact details to check their pre-approved offers.
Even one can easily manage their home loan EMI as per their repaying capacity by calculating it beforehand. All they need to do is use the home loan EMI calculator and then accordingly they can adjust their repayment tenor.
Before applying for self-employed home loans, an individual must go through this guide as it will be helpful for them in the overall application process. Also, they must ensure that they do not have any debts and are doing well in their business. Moreover, they should keep their documents updated for seamless home loan processing.
