Everything You Need to Know About Home Loans for Self Employed

In India, everyone aspires to land a decent job, earn a good salary, or start their own business and fulfil the lifelong dream of becoming a homeowner. Yet, with the rising cost of land and property, owning a home is easier said than done. If you work at a reputed firm and have a good annual salary package, then you can easily get a home loan without much hassle. But what about those who are self-employed?

Well, home loans for self-employed are also as lucrative as for salaried professionals. Yet most people are in the dark when it comes to knowing the eligibility criteria, the documents required and other differences in the home loans for the two. Worry not, because we are here to clear all your confusion and doubts.

Home Loan Eligibility for Self-Employed

Many self-employed individuals worry about how much scrutiny they will have to face as home loan applicants. After all, they might not have a steady stream of income like salaried individuals. You would be happy to know that the home loan eligibility for self-employed is very relaxed in today’s time. Like all applicants, their loan application’s success will mostly depend upon a host of factors:

• Age – If you have age on your side, you can earn more favourable home loan terms from your lender. Thus, younger self-employed applicants have better eligibility and can avail themselves of a longer tenure as well.
• Income – For self-employed individuals, proof of steady income factors heavily in the home loan eligibility criteria. Typically, your lender will demand income tax returns from the previous 3 years and profit, loss and balance statements of your business.
• Business continuity – Proof of business existence and its profitability also weigh heavily in your housing loan eligibility. A long-running, sustainable, and profitable business is a sign of good home loan repayment capability.
• Creditworthiness – The lender also determines whether you have any other existing loans, debts, or defaulted payments before signing off on the home loan. Your credit score is a good indicator of your creditworthiness.

You can also check out your eligibility using the home loan eligibility calculator.

Must Read: What is Home Loan? Everything You Need to Know About Housing Loan

Home loan Documents for Self-Employed

Whether you are an applicant or co-applicant, the following list of home loan documents for self-employed will come in handy when you are applying for a housing loan:

• Address Proof – Aadhar card, Passport, Driving Licence, Telephone Bill, Ration Card, Election Card, or any other certificate from statutory authority,
• Age Proof – PAN Card, Passport, or any other relevant certificate from a statutory authority
• Income Proof – Proof of business existence, last 3 years income tax returns, accountant-certified balance sheets, and last 12 months bank account statement
• Property Documents – A copy of the agreement for property purchase
• Educational Qualifications – Proof of qualification or degree To know more about the documents required, click here.

Home Loan Interest Rates for Self-Employed

Before you go ahead and apply for a housing loan for self-employed, you must know that home loan interest rates for self-employed applicants differ slightly from those for salaried individuals. The reason for this is simple: there is a slightly greater risk for the lender when it comes to the former.

• For home loan amounts up to Rs. 35 lakh and a credit score of more than 800, the rate is 8.55%* to 9.05%*. Similarly, for home loan amounts greater than Rs. 35 lakh and a credit score above 800, the rate is 8.55%* to 9.05%*.

You can learn more about the current housing loan interest rates on offer here.

Bear in mind though that these interest rates change from time to time. As a self-employed applicant, you too get the option to choose between a floating interest rate and a fixed interest rate. However, fixed rates of interest are higher and rarely available than floating interest rates. The rate of interest is revised when there is a movement in the PLR rate. 

The rest of the stipulations, such as the home loan tenure and the amount of home loan that a self-employed applicant can apply for are as per industry norms:

• Maximum tenure of 20 years
• The home loan amount depends upon age, income, repayment capacity, credit score, etc.
• Typically, if you are financing 90% of the property cost, then you get a home loan up to Rs. 30 lakh. At 80%, this amount increases to up to Rs. 75 lakh and, at 75%, this amount increases to above Rs. 75 lakh.

Must Read: Tips to Apply Home Loan After 45

Conclusion

Before you apply for a home loan as a self-employed individual, make sure that all your documents are up-to-date and ready, especially income tax returns and business ledgers. A good time to apply for a home loan is when you are doing well in your business, do not have significant debts and have a credit score 750+. You can even get a salaried co-applicant to boost your chances.

At PNB Housing, we provide state-of-the-art home loan facilities and offers at competitive interest rates for all self-employed individuals. 

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