Criteria for obtaining a home loan

The general prerequisites for obtaining a home loan, regardless of whether you are salaried or self-employed, include healthy earnings and a sound credit profile. Your earnings reflect your ability to repay the loan, while your credit profile indicates your willingness and attitude to repay loans in a timely manner. To determine your ability to avail of a home loan, the lender will ask you to submit certain documents, which may differ on the basis of your work profile. These documents are essentially required by the lender to ascertain the source, consistency, frequency and continuity of income for the loan to be approved. Enlisted below are the main documents which are required for processing a home loan application:

Documents to be submitted by salaried individuals

Salaried people are usually required to submit the following documents:

• Salary slips issued over the past three months.
• Bank statements of the past six months (including statements of salary account).
• Latest income tax return form.
• Employment letter (in case the period of service in the current job is less than a year).

Documents to be submitted by self-employed people

Entrepreneurs and self-employed professionals need to submit documentary proof of their own financial position as well as that of their business or practice. These documents include:

• Income tax returns along with computation of income of the last three assessment years.
• Balance sheets and income statements (with annexure and schedules) certified by auditors.
• Current account statements (of the entity) and savings account statements (of the individual) of the past six months.
• Details of ongoing loans of both – the individual and the business entity, including the outstanding amount, instalments and security.
• List of Directors and Shareholders with individual shareholding (as certified by a chartered accountant or company secretary).
• Copy of Shop & Establishment license, VAT registration or any other mandatory license.
• Copy of Partnership Deed, Memorandum of Association and Articles of Association (if applicable).
• Copies of education qualification and professional practice certificates.

Apart from these documents, all home loan applicants – whether salaried or self-employed – need to submit KYC (know your customer) documents comprising of identity and address proof, along with property related documents, which may vary depending on the type of property that the applicant wishes to purchase. The lender may require some documents in the original form, while copies of other documents may be acceptable. However, all original documents should be kept handy – either for submission or for verification purpose.

Upshot

Contrary to the general belief, home loans aren’t only meant for salaried employees. All individuals (including self-employed professionals, entrepreneurs and salaried employees) can avail housing loans. The applicable terms and conditions are the same for all individuals. Earnings and creditworthiness are the main eligibility factors for obtaining a housing loan.Earnings largely depend on the abilities and experience of the customers, while creditworthiness is a product of discipline and ethics. Creditworthiness is adjudged on the basis of your credit history. All lenders have easy access to detailed information on your credit history – i.e. your repayment track record. A single delay in repayment may become a hindrance in getting approvals for new loans. Therefore, it’s important that you make timely repayment of all your dues – be it credit card bills, car loan instalments, utility bills or personal loan instalments.