While the entrepreneurial bug is spreading across the country, it does bring with it its own set of obstacles. For example, when it comes to obtaining a home loan and getting reasonable Home loan interest rates, salaried folks may still be given preferential treatment over the self-employed group. However, this trend is changing for the betterment.
If you are self-employed and want to increase your chances of obtaining a home loan and get it at best home loan interest rates, keep the following things in mind:
Keep your financial records in line: Regardless of the size of your company, you must keep accurate records of all business expenses, revenues, taxes, bank statements, and payment slips. Before approving a home loan, most lenders meticulously review financial information and on the basis of that best home loan interest rates will be given to you
Improve your credit score: Working towards improving your credit score while running your own business is quite challenging, but your credit score can considerably boost your chances of qualifying for a home loan and help you get the best home loan interest rates. Even a minor vehicle loan you took in the past with regular EMI payments can work in your favour.
Pay off any outstanding debts: It is natural for everybody to upgrade their lifestyle when they start to earn higher. However, if you have outstanding debts at this time, it is advisable to pay them off first. This not only alleviates the financial pressure, but it also provides lenders with some peace of mind and helps you get reasonable Home loan interest rates.
Create a business plan: In the absence of a regular income which salaried class people enjoy, an effective and well-thought-out business strategy with optimistic financial prospects serves as a safety net. If you are looking for a home loan, your lender may not only consider your business strategy as a favourable home loan qualifying factor, but may also begin speedier approvals.
Look for a guarantor: You can consider getting a co-guarantor to speed up your housing loan approval. Your eligibility and chances of obtaining the loan vary depending on the providers. However, most lenders may take solace in having a guarantor on board. In the absence of a credit history or if your business is still in its early stages, a guarantor can help you make a solid case. If you are self-employed, having a co-applicant on your loan can help you get accepted. Including a co-borrower on your home loan application raises your loan eligibility. This occurs because when you are self-employed and apply for a home loan, lenders are unsure about repayment; but, when there is a co-borrower for the same loan, lenders have the confidence to lend because no two people are accountable for repaying the loan. Your chances of getting your home loan application approved are higher if the co-borrower who applied for the home loan with you is also the co-owner of the property. Such applicants are easily approved for a home loan by banks and NBFCs. Apart from that, they must also meet additional eligibility requirements.
Choose the best lender: Choosing a reputed housing finance company is one of the most important factors for speeding up your home loan procedure. When it comes to granting home loans to self-employed individuals, certain lenders may have strict criteria and higher home loan interest rates.
Work on improving your credit score before applying: When applying for a home loan, a solid credit score and credit history work in your favour. A credit score of 750 or above boosts your eligibility for a home loan also. It assists you in obtaining several home loan offers from leading lenders at the best home loan interest rates. It is important to realize, however, that you cannot improve your score overnight. Depending on your existing credit score levels, improving your credit score can take anywhere from 3 to 24 months. So, if you intend to take out a home loan within the next year, start working on your credit score right away. Here are some suggestions to help you increase your credit score:
- Begin by checking your credit report. This provides you with a clear picture of your current situation and what has to be done.
- Never let your credit card bills or EMIs get behind. Pay them back on time and in full.
- Don’t overspend on your credit card. Maintain a utilization ratio of less than 30%.
- Do not have too many outstanding loans. Before applying for a home loan , try to close a couple of smaller loans.
Get your credit report organized and error-free: You must examine your credit health report in addition to your credit score. Credit bureaus create your credit report, and there may be mistakes owing to lender misreporting. So, get the most recent copy of your credit report and carefully examine it to see if any information is missing. If you find inaccuracies on your credit report, submit them to the appropriate credit bureau and get them corrected. Before sanctioning your house loan application, home loan lenders examine your credit report in addition to your credit score. As a result, it’s critical to keep it error-free.
What documents are required?
Self-employed individuals must present more documentation than salaried employees in order for their loans to be approved. The required documents are listed below.
- Property paperwork
- KYC documents, including verification of identification, residency, and age.
- Income Tax Returns: This is the primary document that lenders consider. You must present your tax returns for the last two years so that the bankers can assess the viability of your business.
- Statement of loss or profit for the current fiscal year
- Bank statement from the previous 6-12 months • Education qualification certificates
- Income information for co-applicants • Professional practice certificate • Form 16A or tax deduction certificate
Entrepreneurs who have just started their business may have difficulty obtaining a home loan because lenders need a minimum of three years of effective business operation. However, if you have a solid business strategy or a track record of good turnover, you may be eligible for redemption.
So we are saying,
As a self-employed person, you may have to go through a different process while looking for a house loan, company loan, or personal loan. However, the measures outlined above will assist you in obtaining a loan fast and efficiently and help you get the Home loan interest rates.
