Many banks and financial institutions have a streamlined process for home loans that are similar for salaried and self-employed individuals. However, when it comes to your income and employment, the eligibility criteria differ. This is because the nature of income and its stability are different.
They ask for a varied set of home loan documents required to fulfil the set parameters. You also get the loan amount sanctioned differently than salaried professionals. It is best to check the same with the home loan eligibility calculator. If you are confused going into the process due to separate parameters, read on to find out what you need.
Documentation: The paperwork for the loan process consists of personal identity proof, resident proof, age verification, banks statements of the last six months, a professional practice or business certificate, tax returns of the previous two years, proof of business continuity, profit and loss statements, etc. These requirements vary from lender to lender. However, it is best to stay prepared with the standard documentation to calculate home loan eligibility with ease.
Stability: Lenders evaluate your income based on the past two years’ performance or your business or professional practice. They are concerned not only about your earnings but its feasibility. They want to see the tangible profits you produce to gauge the longevity of your entrepreneurship. This is why most start-ups struggle with being eligible despite backable funding. So, make sure you have sustainable revenue to show for your home loan eligibility.
Tax returns: Inconsistent tax filing is a norm if you have a small-scale business without a proper auditor. However, not only does this affect your financial statements but also your home loan application. To satisfy eligibility for home loan, you should have filed tax returns properly for the past two years of application. You should also have all the documents required to prove the same. So, make sure to stay up to date with your filing and avoid delay.
Good credit history: This remains the top priority for lenders for sanctioning loan to all applicants. It becomes even more prudent for self-employed as there is a frequency of debts involved. They finalise your home loans eligibility by evaluating your credit history. They analyse your credit score, which should be 750 or above. They also look at your repayment patterns from the credit report. It is advisable to pay off debts that are written off to sustain a healthy rating.
Most of the parameters remain the same. However, your maintenance of profit and loss statements and other financial documents is essential for a smooth loan process. The lenders scrutinise your applications with stringent terms due to fluctuating income. It is best to create a solid financial standing to counter such concerns.