Buying property is a considerable investment, which is why most people usually opt for a home loan. Now, if you’re a first-time applicant, you may find the application process a bit confusing. But if you’re a self-employed person, then the application process can feel particularly challenging.
Since self-employed individuals don’t earn a stable income like salaried individuals, the chances of default are relatively higher. This ultimately puts the lender in a tight spot, so you might need to do some additional convincing.
Here are 5 steps to ensure your application is accepted in a single go.
- Have a good self-employment record
Salaried people have a steady monthly income, so lenders prefer them as the risk involved is low. However, if you have been self-employed for some time (ideally for 3 years or more), and your business is getting good returns consistently, lenders will most likely accept your application. This is because a steady income raises your home loan eligibility by making you a lower-risk candidate.
- Provide a snapshot of your total earnings
Being transparent about your finances is a sure-shot way to convince the lender. So, before you apply, prepare all the necessary documents in advance, from your balance sheets to profit and loss statements from the previous years. To convince the lender further and qualify for the home loan, you may also need to provide a list of your debts, assets, monthly payments, additional income sources, bank statements, etc.
- Have a good credit score
For a lender, your credit score is a vital determiner of your repayment ability. So, if you try to maintain a high credit score (>750), you’ll have a better chance at loan approval. What’s more, you may also get better home loan interest rates. How to do this? Well, make sure you pay off pending dues timely and have good credit practices in general. Over time, your credit score is sure to build up.
- Chip in a large down payment
You only get 80-85% of your property costs from the lender. The rest you need to arrange yourself as a down payment upfront. Since paying a larger down payment reduces the loan amount and the lender’s risk, they will be more open to considering your application. Additionally, this can offset an irregular income record too!
- Maintain significant savings
Although you may have set funds aside for your down payment, keep your savings in place. Having these additional funds assures your lender you’ll be able to repay your EMIs on time even if your business experiences losses in the future. Besides, you can also use a home loan EMI calculator to get better estimates of the loan costs and plan effectively.
Conclusion
While getting loan approval might seem challenging at the outset, there are definite ways you can convince the lender and qualify for one. Having a steady employment record, a high CIBIL score, and enough savings can assure the lender of your creditworthiness. All you need to do is perform due diligence.
So, chalk out your goals and use a home loan calculator to craft a budget before beginning the application process. With all these considerations, you can improve your approval chances favourably.
