Self-employed? Here's how to get a home loan

India is a land of entrepreneurs and today the entire world salutes their spirit. But when it comes to taking home loans they have to undergo heavy grilling by the lenders compared to their salaried counterparts. This makes you think that being in business limits your prospects of getting a home loan, but, think again.

Lenders now could not ignore the growing crop of entrepreneurs. In fact as the number of entrepreneurs have increased manifold in recent times, the banks too are taking keen interest in this segment.

Thus taking cognizance of the scenario, banks have made all-out attempts to make the lending process simpler for entrepreneurs than what it was few years ago. Still the fact cannot be ignored that the processes, that you as a business owner will have to go through, will be slightly different than if you were employed.

The banks as lenders have to follow slightly stringent norms when it comes to lending to self-employed. Your lender would want that you should have a business record of at least three years. Then they would like to go through your tax returns filed for the previous years to have an overview of the stability of your income.

Thus if you run your own business and are a home loan aspirant too, it is important you keep your business records clean. These will come handy when you approach the lender. If you are properly documented then in all probability you will be considered to be in the low risk zone.

The broad eligibility criteria for taking home loan includes that you should have gross annual income of Rs 1,00,000 or above, be 23 years of age and above with maximum age of 58 years or retirement age, whichever is earlier at the time of loan maturity and 3 years of continuous operation. Besides you will need to furnish identity and residence proof, educational qualification certificates and proof of business existence.

We list here the documents that the self-employed/businessmen will have to furnish for availing a home loan:

• A brief introduction of your business/profession
• Balance sheet, profit and loss account and statement of income with income tax returns for the last 3 years certified by a chartered accountant
• A photocopy of advance tax payments (if applicable)
• A photocopy of Registration Certificate of your establishment under Shops and Establishments Act/Factories Act
• A photocopy of Registration Certificate for deduction of profession tax (if applicable)
• Bank statements of current and savings accounts for the last 6 months
• A photocopy of any bank loan (if applicable)
• A photocopy of the first and last pages of your ration card or a copy of PAN/telephone/electricity bills
• A photocopy of LIC policy (if applicable)
• A photocopy of investments (FD certificates, shares, any other fixed asset)

But basic purposes outlined by lenders remain the same whether you are employed or run a business.

You should have steady income from your business and above all an inclination to repay. Loan amount depends on your repayment capacity as determined by the bank (your lender). The equated monthly installment (EMI) would be based on the quantum of loan, rate of interest and the repayment period.

One thing is certain. These loans are not uncommon today. Entrepreneurship is at an all-time high and financial institutions are aware of this fact and have special programmes and regulations in place to serve this group of borrowers.

But do not forget the golden rules: Don't eat more than you can chew! Do not borrow more than you can comfortably afford to repay. So here the advice is that you bargain for the lowest rate and be sure that you read the fine print.

With little work and attention to detail in your record keeping, you are in a comfort zone from where you can approach any lender with confidence.

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