ATM :: Are You Self-employed? Here’s How You Can Get Home Loan



We worship the self-employed and entrepreneurs. But the self-employed and entrepreneurs know all too well the difficulty in getting a home loan. Lenders only grow suspicious while dealing with a loan applicant who is self-employed.

Let us take the case of Sushala Vishwanath, a Bangalore-based interior designer in her late 30s and how she got her home loan. The story is not vastly different from the rest. She had approached about 10 different banks before the State Bank of India (SBI) granted her a loan Rs 28 lakh, against her requirement of Rs 34 lakh. But she had a tough time getting a home loan. “It’s not just about getting a home loan. It’s about the amount of paper work involved and the lenders are suspicious about everything we do,” she said. But things are changing for the better for the self-employed.

Over the past couple of years, banks have started getting very serious about self-employed people. Almost every housing finance company has designed a home loan product for the self-employed. The interest rate may be a tad higher than the others but at the end of it, you still have a scope to get a home loan. It is also important to note that banks shy away from offering fixed rate of interest to this segment of customers.

Following are four key points that lenders consider while processing loans for the self-employed:

1. IT returns: This document is an important one when it comes to income verification. Lenders check past two years of tax returns statements to verify your income. In fact, they take an average income of 24 months to validate your loan. However, lenders do not look into whether it has been a good year or a bad year for your business. So we suggest that you should apply at a time when your business is doing well.

2. Current fiscal profit and loss statement: Being self-employed comes with the additional responsibility of managing your own accounts. So it has to be done meticulously. While applying for a home loan, you have to give a detailed statement of your current year’s profit and loss.

3. Loan eligibility: So how do lenders assess loan eligibility? They take your net profit, consider the business use of your home, add depletion and depreciation, and calculate your income, which will decide your loan eligibility.

4. Safe candidates: Self-employed candidates with higher down payment on home buying, good amount of savings and a good CIBIL score are clear winners from a lender’s perspective. Lenders also take applicants seriously if you have a steady income and some records to show that you have the willingness to repay.

Axis Bank, one of India’s leading private sector banks, launched a home loan product for the self-employed in early 2013. Commenting on the launch, Jairam Sridharan, head of consumer lending and payments, said in a Press release, “Self-employed people are the backbone of the India growth story. However, credit availability to this group tends to be limited. With ‘Empower home loans,’ Axis Bank would like to partner in the progress of this group of customers and reward them for good credit behaviour.”

Most banks offer home loans for purchasing an under-construction, ready or resale house, plot plus construction and home extension, and improvement loans just like any other loan.

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