Home Loans for Self-Employed: Tips for Easy Approval

According to estimates from industry experts, self-employed individuals make up approximately 20–30% of India’s home loan borrowers.

Despite this significant representation, obtaining a home loan is challenging for self-employed individuals compared to salaried professionals. Irregular income flow, lack of conventional documentation, complex financial records, and the belief that self-employed individuals are high-risk borrowers often create hurdles during the loan approval process.

However, with the right strategy, self-employed borrowers can enhance their chances of successfully obtaining a home loan.

Tips for Self-Employed Borrowers on How to Secure a Home Loan

Here are some crucial tips to make the home loan approval process easier for self-employed borrowers.

1: Get Your Finances Sorted

Lenders assess your financial stability through financial documents, which are also necessary to obtain a home loan. Keep these documents ready to streamline the process:

• Income Tax Returns (ITRs) for the last 2-3 years 

• Last six months’ bank statements

• Audited profit and loss statements (for business owners) to showcase consistent revenue and profit trends 

• Business registration proof

2: Maintain a Steady Income

Lenders prefer borrowers with a steady or growing income, as it indicates financial stability and repayment capacity. If your earnings fluctuate, be prepared to explain any drops with valid reasons and support them with documents such as upcoming projects or signed contracts to reassure lenders of your ability to pay EMIs on time.

3: Boost your Credit Score

Lenders usually evaluate your credit score and repayment history to assess your eligibility for a home loan. A credit score above 750 indicates financial discipline and boosts approval chances. It also increases your chances of getting better home loan interest rates.  

Improve your credit score by:

• Limiting credit utilisation

• Clearing outstanding debts

• Paying bills on time

• Avoiding multiple loan applications

• Checking your credit report for errors

4: Disclose All Income Sources

As a self-employed individual, you may have multiple income sources, such as business profits, investments, income from freelancing, or rental income. Declare all income sources to give lenders a complete picture of your financial health and strengthen your application. 

5: Consider a Co-Borrower

If you have a fluctuating income, adding a co-borrower (parent, spouse, or sibling) with a stable income and a solid credit history will greatly increase your chances of getting approved.  

Lenders evaluate the income, credit score, and financial stability of both co-applicants. It also reassures lenders, as they can approach the co-borrower if repayments stall.

6: Opt for a Larger Down Payment

A higher down payment (20-25% of the property value) reduces the loan amount and lender risk and shows your financial commitment. In addition to enhancing your loan eligibility, it also helps you negotiate better home loan interest rates. 

7: Find the Right Lender for You

• Prior to choosing a lender, consider key factors that align with your financial needs. Look for lenders offering:

• Customised home loan solutions

• Competitive interest rates

• Flexible repayment tenures 

Final Thoughts

Securing a home loan as a self-employed borrower is possible with careful planning and preparation. 

IndusInd Bank can help you turn your dream into reality with customised home loan solutions. They simplify the home loan process with the following features:

• Quick approvals and minimal documentation

• Transparent terms with (no hidden charges)

• Balance transfer facility

• Loan tenure of up to 30 years

Take the first step towards acquiring your dream home by applying for a home loan.