Get Self-employed Home Loan | Documentation & Procedure

Self Employed home loans: Check Criteria, Documentation, Interest Rates, Eligibility for professional & Non professionals.

Banks do not go out of the way to pursue non-salaried or businessmen, self-employed people for home loans but it is not tough to get one sanctioned with proper paper work. It is true that in case of salaried entities banks find it easier to deal with EMIs or equated monthly installments.

Banks follow a different sanction processes as there is no standardization or straightforward procedure in case of non-salaried person. Lenders do not extend loans till they are completely convinced of repayment capacity of the applicant on a monthly basis. There are some measures which can be taken to ease the sanction process.

A salaried borrower seeks a loan worth 80% of property value in comparison to non-salaried borrower’s 55-60%. This means that the loan-to-value (LTV) ratio is better and thus advantageous in case of non-salaried applicant.
 
Most of the banks offers home loans to self employed borrowers after 3 years of successful business. Maximum Age limit is 65 years. Maximum repayment period under some banks are 20 years instead of 30 years. Interest rates amy be differ from salaried persons, example – Axis bank offers 9.60-9.65% for salaried & 10.45- 10.50% for self employed.
 
More Documentations & More security required in case of self employed borrowers.
 

Home Loan applications received for rupees ₹ 419,027 crores till 27 December 2024

DOCUMENTATION

Apart from usual documents like filling know-your-customer or KYC, proof of income is a must. For salaried people, salary statement, Form 16 submitted in Income Tax (I-T) department is considered sufficient but for others an alternate proof is needed. He/she could have various sources of income (dividend, interest on invested capital etc.). The one document that would show the income from all sources is the computation of income statement submitted to the I-T department. Thus banks insist for this document and I-T returns for last three years. They even require balance sheet and Profit & Loss statement (certified by a chartered accountant). In case loan is applied before filing of returns, current year’s provisional statement and advance tax challans (if any) would have to be delivered.

PROCEDURE
The only thing that bank needs confirmation of is that loan is repaid on time, so your loan will get sanctioned as the banker is convinced about the cash flow and strength of your business. Banks tend to discuss the matter directly with the owner/proprietor to get insights on the business model, actual margins, business mix etc. It is imperative that they compare the actual cash flow with the financial statements submitted to arrive at the net worth of the seeker.

They even regard factors like properties owned by the applicants, their track record with their personal banker, overdraft and working capital details, line of business and so on.

There is no thumb rule for EMI servicing capacity like for salaried personnel which is 50% of the net salary. Documents and personal discussion forms the basis of loan being sanctioned.

SELF-EMPLOYED PROFESSIONALS
Documents in this category is simpler than businessmen as usually the professionals earnings are reflected in their financial statements leaving no room for doubt. But it is possible that self-employed non-professionals could be conducting a major part of their dealings in cash.

The qualified professionals — like chartered accountants, doctors or engineers — always land a well-paying job even in adverse business times.
To conclude:

Qualified professional

• have better chance of getting their loans sanctioned if they are well-qualified and easily employable.
• Steady income, credit history and income tax records of last three years are very important.
• In some cases the registration certificate for deduction of profession tax and the certificate of practice also need to be submitted.

Owner of a proprietary concern

• Should have income statement and tax returns ready.
• Registration certificate under Shop and Establishment Act and Factories Act Bank account statements.
• Profit & loss and balance sheet statements should be in order.
• Give an accurate picture of your net worth.

A partner of a partnership firm

• Keep an up-to-date deed of partnership that provides for all situations.
• Partners info
• Income Tax returns
• Bank account, profit & loss and balance sheet statements should be in order
• Clear communication on your firm’s goals, business mix, margins, etc. while in discussion is vital.
• Calculate Home Loan EMI and Eligibility on Home Loan Calculator