Self-employed? Here are some tips to make sure you qualify for a home loan.
You know it. Purchasing or constructing your dream house requires significant investment. And home finance helps you fund your housing needs without exhausting your savings. However, if you are worried about your loan eligibility, we have you covered. Read on.
Keep your income proof ready
As a self-employed borrower, your income is a decisive factor when you apply for home loan. It helps the lender evaluate your repayment capacity.
So, the lender meticulously verifies your income tax filings, profit and loss (P/L) statements, balance sheets, bank statements, etc. It is essential to have a steady stream of income and show the paperwork that reflects the same.
Tidy up your credit
Lenders diligently check your credit score to determine your creditworthiness. Thus, you need to evaluate your credit report before approaching the lender. Review the report for any gaps or errors and correct any mistakes. It takes about two months for these revisions to show up on the credit statement.
Additionally, you can qualify for more lucrative interest rates with a high credit score, ideally over 750. To improve your score, pay off outstanding debts, timely repay credit card bills and clear pending dues.
Have a co-applicant
Another excellent way to enhance your home loan eligibilityis by having a co-applicant with a regular income. A family member like your spouse, parent, or sibling can become a co-applicant.
This increases your loan approval chances. How? This is because your lender considers the credit score, income, and financial stability of both co-applicants. So, you can qualify for a bigger amount as well. You can even enjoy more attractive interest rates and combined tax benefits.
Keep existing debt and additional costs in mind
To understand your financial fitness, lending institutions evaluate your potential ability to pay off new debts. They look at your current debt obligations and check your debt-to-income (DTI) ratio. Here, the DTI ratio represents your net monthly debt payments, including credit card bills, existing loans, etc., divided by your gross monthly income.
A DTI, ideally below 35%-40%, indicates a good balance between your outstanding debt and income and boosts your loan eligibility.
Besides, as a self-employed individual, you must consider your additional expenses like your business’s cash flow and operational expenses, home-related bills, etc., before getting a loan.
Opt for an extended loan tenure
When you choose a longer tenure, you pay smaller EMIs. This enables you to make timely repayments. However, an extended loan term means your interest outgo will be higher. So, use a home loan EMI calculator to figure out an ideal EMI amount and interest payable in advance.
Additional Read: How to Apply for a Home Loan If You Are a Self-Employed Individual
Over to you
If you are looking for a reliable financier with relaxed loan eligibility for self-employed and salaried individuals, turn to Tata Capital. Get multi-purpose home financing with simple documentation and a hassle-free online application process.
Avail of loan amounts up to Rs. 5 crores and attractive home loan interest rates starting at just 6.90%. So, wait no more. Connect with us today!