What Are The Home Loan Tips For The Self-Employed?

Most of us may not be aware that the self-employed group generates a significant proportion of housing demand. At the same time, this segment’s credit penetration is lower than the real house buying ratio. But, for three main reasons, it has been easier for them to secure a home loan in the last few years.

One, housing finance firms opened their doors to them by offering personalised home loan suited to their needs. Two, the flagship missions of the government have started focusing on businessmen to a great extent; and three, the market has more financial institutions than before.

Considered a high-risk category, self-employed people create a high potential prospect. Many housing loan companies have developed their capacity for evaluation to ensure that this target group is not left unattended. Customised plans get developed to deliver a reduced disbursement period and reasonable interest rates for home loans.

What do housing finance companies typically look at before approving a loan for the self-employed?

  • Credit history: Financial institutions typically track the credit score of the applicant, which shows the credit history of the applicant. This helps them evaluate the involved risk factors and consider the potential for repayment. With higher down payment on home buying, additional savings and a good credit score, self-employed applicants can have higher chances of a housing loan

  • IT Returns: When it comes to income verification, this document is significant. The last two to three years of tax returns are checked by financial institutions to authenticate income and assess the stability of profit in the previous two years.
  • Property appraisal: After reviewing the particulars of the applicant, the financial institution must further review the property to determine that it is free of any obligations and has a valid history of ownership. Any issues that occur during the property assessment could contribute to the denial of home loan, even if the income assessment is satisfactory.
  • Existing loan: If the borrower has an existing loan, the amount of the eligible housing loan gets adjusted to the EMI-to-income ratio of 50 to 60 per cent.
  • Payment tenure: Housing finance companies now give loans for as many as 20 years. People will start paying low EMIs on their loans, and they can increase the EMIs as their income go up. It manages their outflows and helps them to concentrate on their company success without thinking about their finances. Most financial institutions and housing finance companies provide stepping-up repayment services that allow the consumer to start with a smaller EMI and slowly increase it as income rises.

Usually self-employed apply for a home loan for under-construction, ready possession or resale house, house extension, and even construction on a plot of land.

You could even consider online home loan through mobile banking apps or directly via the lender portal.

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