Jane Austen, the famous English novelist, once said, ‘There is nothing like staying at home for real comfort.’ Nothing can be more true. All of us aspire to be proud home owners, but a home purchase needs a huge amount of money and very few can afford to buy one as an outright purchase. This is where lending organizations come into the picture. They make your dream come true providing you the required amount of money to fund your home, repayable in modest installments over a long term of 20-30 years.
Self-employed? You are eligible too
Self-employed entrepreneurs can get home loans with as much ease as those with salaries or regular incomes. Lenders have designed home loan products specifically tailored to meet the requirements of the self-employed.
In general, there are two categories of self-employed individuals: professionals and non-professionals.
Eligibility to Apply
Self-employed individuals are eligible to apply for home loans, either individually or jointly. While all proposed owners of the property will have to be co-applicants, all co-applicants need not be co-owners. Usually, co-applicants are close family members.
Key factors considered by the lender are:
For this purpose, lenders require 3 years’ IT returns and at least 2 years’ audited Profit and Loss Account Statements and Balance Sheets of the business entity.
The lender assesses the home loan application based on certain individual parameters like:
- Applicant’s age:The younger you are, the more time you have to repay your loan and longer the home loan tenure you can apply for. Older applicants may need to make a larger down payment towards the home purchase.
- Educational qualifications: Some lenders use educational qualifications as a parameter for assessing the eligibility of the customer.
- Number of dependants: The amount of disposable income is an important factor in assessing the applicant’s ability to repay the home loan. It is assumed that higher the number of dependants, lower is the applicant’s disposable income and vice versa.
Your ability to repay the loan is based on your overall financial position. The lender assesses your existing debts such as credit card bills, personal loans, another home loan, etc. Lower your existing debt, greater are the chances of securing a home loan.
As you are self-employed, your ability to generate income is a crucial factor. The lender looks for profitability of your enterprise and also the number of years you have been successfully operating the business. It also helps if you can provide the documents concerning the risk factors of the business. All these elements (including your overall financial position and entrepreneural ability) will be judged by the lender from your audited financials and IT returns. Make sure your accounting books and tax returns are up-to-date.
The following are the important documents that all the applicants/co-applicants need to submit along with the signed application form for the loan approval:
Terms and Conditions
Indicated below are the broad terms and conditions applicable to home loans for self-employed applicants:
The maximum tenure for home loans under adjustable rates can stretch up to 30 years. In case of fixed rate home loans, the maximum tenure is 20 years.
The amount of loan approved by the lender will depend on a number of factors such as the customer’s repayment capacity, age, etc. Indicated below is the maximum amount the lender would offer depending on the cost of the property:
Lenders offer two kinds of interest rate options – fixed and adjustable.
Some lenders allow customers to switch between fixed and adjustable rates depending on certain conditions.
Some Key Points on Home Loans for the Self Employed
Here are some aspects to keep in mind on how to get home loan, specifically in case of self-employed home loans: