4 Ways to Increase Home Loan Approval for Self Employed Professionals


It’s a common notion that self-employed individuals often find it difficult to get a home loan approved. However, it is so not true. Financial lenders have well-defined requirements and norms and while offering housing loans to self-employed individuals. These eligibility criteria must be met by applicants to avail the loan. The eligibility criteria vary from one financial lender to another and from self-employed individuals to salaried individuals.

Self-employed individuals like accountants, businessmen, doctors, traders, lawyers and accountants can easily apply for a housing loan and get the same processed as well. Several lenders offer customized home loans to self-employed individuals to meet their requirements. Banks usually check the required documents like P&L (Profit & Loss) statements, income tax and balance sheets of self-employed applicants in order to assess their income as well as loan eligibility.

Following are the 4 Ways in which a self-employed applicant can increase their chances of Home Loan approval:

  1. Adding a Co-Applicant to the Home Loan Application

Adding a co-applicant will increase your chances of availing a home loan if you are a self-employed individual. Addition of a co-borrower to generally increases your eligibility depending on the other person’s income, credit rating and financial status. As you are self-employed and the financial lenders are unsure about your loan repayment capacity, adding a co-borrower for the same loan application will boost the confidence level of the lenders as two applicants are responsible for the repayment of the loan.

  1. Good Credit History

Bad credit history can always haunt an individual at some point in their life. Your credit history plays a vital role for financial lenders while determining the lending decision. Your credit score is the basic tool through which you get access to higher loan amounts and lower home loan interest rates.

A good number of financial lenders don’t consider applications for housing loans from self-employed individuals having credit scores below 650. If the self-employed individual can convince the financial lender with steady monthly cash-flow and the company’s stability with net income as well as profits, then the home loan application can surely be processed by the lenders. Usually, financial lenders do offer home loans to self-employed applicants having a lower credit score, but it usually carries a higher interest rate.

While assessing your credit report, lenders consider your repayment history towards credit card dues, loans and bad accounts. You must always make sure that you repay any written off amount present in the credit report to improve your credit score. Financial lenders also estimate your ability to pay the EMIs by considering your fixed obligations to your net income on a monthly basis. This ratio is also known as a fixed obligation to income ratio (FOIR). A lower FOIR score is always preferred by lending institutions.

  1. Having a Guarantor for the Home Loan Application

Having a Guarantor can assure you that your home loan application will be processed quickly by the financial lenders. A guarantor for the home loan generally decreases the risk for lenders and instils confidence. A guarantor is a sign of assured repayment of the home loan, as the lenders can recover the loan amount from the guarantor in case the applicant fails to repay the loan amount.

  1. Making the Co-Borrower the Co-Owner of the Property

If the co-borrower in the home loan application is also the property’s co-owner, then you are in an extremely good position to get your home loan processed. Banks and Non-Banking Financial Companies (NBFC) usually process such applications quite easily if the co-applicants are also named as co-owners due to decreased liabilities.

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