Why You Must File Your ITR if You Want a Home Loan

In order to purchase your dream home, which could be a flat, independent house or a villa, you need to make a significant financial investment, which in most cases will run into lakhs, if not crores. If you have managed to save that much amount for an outright purchase, then you should be lauded for your financial planning, after all very few people get to buy their own house through outright purchase. But if you are also amongst numerous other prospective home buyers who do not have enough money saved for purchase against down payment, then you must avail a Home Loan to be able to purchase the residential property that you desire.

“Where can I get a Home Loan?” -This question bothers most prospective home buyers. Well, the answer for this is simple enough; there are several financial institutions, private as well as public sector, who offer this product. You just need to apply with them along with the documents prescribed by them. If you meet the eligibility criteria of the particular lender, then your application will be approved in a few days. Thereafter, you need to pay the margin money to the lender (approx. 10-20% of the value of the property), who will then remit the total amount (loan amount + margin money) to the seller. After the registration formalities are completed, you need to submit the original property documents with the lender as a security against the Home Loan.The lender will then create a charge over the property,and it would continue to be so, till you repay the entire loan amount along with interest.

Documents Required for a Home Loan

Even though Home Loan is a secured loan, wherein the residential property purchased with the loan amount is mortgaged with the lender, you need to provide numerous documents related to your financials and banking. These documents are required by the lenders to evaluate your financial position and creditworthiness whether you are a business owner or are a salaried employee. You need to understand that as the lenders do not know you, they will ascertain your eligibility for the Home Loan based on these documents only. So whenever you are thinking of applying for a Home Loan, make sure you have the following essential documents with you:

• Income Tax Returns for 3 years
• Banking Statements for last one year (current + savings)
• Audited Financials for 3 years (Balance sheet, Profit and Loss account with annexures)
• Salary slips/Form 16 for last 3 years
• KYC Documents (PAN, Aadhaar, Passport, Voter ID, and others)
• Photocopy of property documents with complete chain and sanctioned map
• Net worth statements
• Running Loan Schedules with corresponding bank statements
• Form 26 AS for 3 years (TDS)

There could be any other documents that would be required by your lender depending on your case. Please ensure that you provide the documents as and when required for speedy approvals.

Importance of ITR for Availing a Home Loan

ITR or Income Tax return is an acknowledgement of the tax return you have filed with the Income Tax Department for a particular financial year. ITR is a significant financial document which would be required on numerous occasions when you will be applying for a loan or any other business transaction.

When you apply for a Home Loan, it is imperative that you have filed you ITR due to the following essential reasons:

• ITR is considered the single most important document by the lenders in order to assess your level of income. Most lenders require your ITR for last three years (in some cases even more) to process your application. They will not be accepting your application for a Home Loanif you do not have ITR for last three years.

• Your ITR must reflect stable income levels over the last three years, most preferably increasing income, in order to assure the lenders that you have a steady source of income and would be able to repay the EMIs (Equated Monthly Instalments) on time.

• If you have not filed your ITR or have not paid the taxes, not only could you be prosecuted by the authorities for the same, no lender would be willing to accept your application for a Home Loan as it shows you as a financially irresponsible person.

• Most lenders will ask you to furnish a net-worth statement along with the Home Loan application. A chartered accountant will be able to prepare your net-worth statement only on the basis of your ITR. Without ITR, no chartered accountant will be able to prepare the required financial documents for you.

• If you are running a business or are an employed salary earner, financial institutions demand audited financials for processing of your application. In order to get your financials audited by the Auditor, your ITR must have been filed on time and the taxes paid on time.

It is imperative that you have filed your ITR along with the taxes for the last three years, on time. Otherwise, it would jeopardise your quest to purchase your own home.

Also Read: If You Own More Than One House, Here’s How You Can Avail Tax Relief

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