Home Loan Eligibility Criteria Varies by Your Employment Type

Many people believe that only salaried individuals can avail Home Loans. They feel that banks are not flexible in dealing with Home Loan applications received from self-employed persons. It is not so. Both salaried individuals and self-employed people can get Home Loans. The terms and conditions are same for both these categories of borrowers. The only difference is the nature of documents you submit to the bank. Banks look at the following factors alone while dealing with Home Loans:

• Income of the borrower – It should be a continuous source of income
• The creditworthiness of the borrower – The credit report will indicate your credit history
• Value of the property – It determines the extent of loan you can get

Let us look at the various documents each category of the borrower has to submit to the banks at the time of Applying for a Home Loan.

Know Your Customer (KYC) Documents

These documents are the same for both salaried individuals and self-employed persons.

Identity Proof

1. Passport
2. Aadhar Card
3. Driving licence
4. PAN Card
5. Voter’s ID
6. Any ID proof document issued by the Government

Address Proof

1. Registered Rent or Lease agreement
2. Passport
3. Ration Card
4. Driving Licence
5. Latest Electricity or Gas bill

Income Proof

Salaried Individuals

1. Salary slips of the previous three months are evidence of salary
2. You should also furnish a bank account statement of your savings account reflecting the credit of salary. It will also indicate the other statutory and mandatory payments you make from your account.
3. Banks insist on submission of income tax returns or Form 16 for the previous two years.
4. A certificate from your employer proves the continuity of your employment with the organization.

Self-employed Persons

Self-employed persons can be professionals like Chartered accounts, doctors, and advocates. They can also be sole proprietors of small and large concerns. They can be partners or shareholders in a joint stock company. Any self-employed person with a source of continuous verifiable income is eligible for Home Loans. The following documents prove the income earning capacity and the continuity of income.

1. Statement of account of the firm/business concern reflecting the income received from business activities.
2. Statement of savings account of the individual helps the bank to determine theindividual income and other expenses.
3. Income Tax returns of the past 2 years to establish continuity of business
4. Professionals should submit the copy of the CA registration, bar council,and medical council registrations as proof of their profession.
5. Other self-employed persons can submit copies of shop registration, GST registration, and so on to prove the existence of the business.
6. Partners in partnership firmscan produce a copy of the partnership deed
7. Directors of companies should provide the Memorandum of Association and Articles of Association to prove their ownership in the companies.
8. All business people should submit audited financial statements for the preceding two years. These statements include the balance sheet and profit and loss statements.

Both the categories of borrowers should submit the statement of accounts of any current loan liabilities to help the banks determine the regularity of repayment. Of course, the banks have access to CIBIL reports to judge the borrower’s credit history.

Other Documents

The property documents are essential for the banks to process the applications. These documents depend on the nature of the property.

1. Copies of title deeds of the property right up to the parent document help the bank establish the chain of ownership.
2. Copies of Encumbrance certificate for the past thirty years help the bank to look for the creation of encumbrances.
3. Copies of the approved construction plan and permit
4. In case of flats, the borrowers should submit the copies of the agreement made between the borrower and the builder. It should have a detailed representation of the various stages of construction including the time frame.
5. In case of purchase of readymade flats, the copies of share certificates issued by the society
6. Agricultural borrowers can submit the copies of the 7/12 and 8A extracts to prove the ownership of the land.

You should submit all these documents to the bank along with the application form. In case of joint applications, both the applicants should furnish KYC documents and income proof.

Thus, you can see that the home loans are available for both salaried individuals and self-employed persons.