Akanksha, a 36-year-old freelance designer, decided that it was time for her to buy a house. She had a fairly stable source of income with minor deviations, making her more confident in the decision that she could easily handle the financial requirements of a housing loan. However, the banks that she went to didn’t exactly reciprocate this sentiment.
This is a universal trend across banks and NBFCs – self-employed individuals are considered to have an uncertain future regarding their job stability and income level, making them a risky proposition for banks to consider them for a housing loan.
Thus, it’s important for self-employed housing loan applicants like Akanksha to follow protocol to maximise their chances of obtaining the amount they require. There are three things in this regard that need to be kept in mind.
Eligibility Criteria
To be eligible for a housing loan, you need to meet the following requirements:
- The applicant should be between 21 and 60 years of age.
- The annual income of the applicant should be above Rs. 1,50,000.
- The applicant should be working in his field for a minimum of 3 years.
Documentation
Keep the following documents ready while going for the application process of the home loan:
- The signed application form with a passport-size photograph
- All documents for KYC (ID proof, address proof, and age proof)
- A copy of the Income Tax returns for the past two years (attested by a CA)
- A copy of the company’s Balance Sheet and the Profit & Loss account, if any (attested by a CA)
- A brief description of the company on the Business Letterhead, if any
- A bank statement of the past six months for Savings A/C, Current A/C, and Overdraft A/C
- A copy of the VAT Registration and/or Shop & Establishment License, along with any other relevant documents, if any
- A copy of the Partnership Deed, MoA, and AoA, if any
- A copy of Form 16A and/or any Tax Deduction Certificate
- The details of one’s contract, if required
- A copy of Advance Tax Paid and/or any Self-Assessment Tax
- A copy of one’s Education Qualifications and Certificates
- A copy of one’s Professional Practice Certificate(s), if any
- A cheque to pay the fee for processing a home loan
Factors to keep in mind
While not outright necessary, keeping the following things in mind will help an individual during their process of applying for a housing loan.
- Most banks and NBFCs tend to group self-employed individuals under two brackets – Self-Employed Professionals (SEP) and Self-Employed Non-Professionals (SENP). Generally, SEPs like doctors, chartered accountants, and architects – to name a few – are favoured due to a higher level of confidence in their profession and the substantial income level they receive as a result.
- It’s important for applicants to make their image as safe and clean as possible from a financial perspective. A larger down-payment, a higher amount of savings, and a reliable CIBIL score will go a long way in improving one’s chances of acquiring the home loan they desire.
- The advent of new-age lending institutions has reduced the headache most people experience while opting for a housing loan. NBFCs like Clix Capital have streamlined the process of applying for and availing a housing loan, making this financing option more accessible.
For a self-employed individual, going for a housing loan can seem like a daunting experience. People like Akanksha are littered all across India, who face numerous problems while going for a housing loan that will suit their needs. Having an idea of the eligibility criteria, required documentation, and various internal and external factors that sway the opinion of loan providers will go a long way in ensuring that the process of availing a housing loan is not needlessly complicated.
