Home Loan Documentation for Self Employed

Once customers become convinced that the property prices and interest rates are in line with their budgets, they would start looking at this option. However, it is not likely to happen immediately. According to some realtors, the sops could actually prompt players to look at even the first house in a far off location. For example, a place like Mumbai is well connected by train. People won’t mind buying a place if it is within their budget and the location is convenient. However, big ticket purchases such as luxury apartments and farm houses seem a bit remote. At the moment there is not much query about these cases. People seem to be postponing their decisions because they are worried about their career prospects. Once things start looking up, especially in the financial sector, it is quite possible that people would show more interest.

In fact it is not the interest rates or buyers waiting to see a further fall in realty rates. Earlier the demand was due to investors of real estate who earned their finances from speculation or Stock Markets. The demand on account of actual requirement of purchasers was far less compared to realty investors. No doubt the first half of 2009 may be good for buying realty provided the dealing is completed prudently. Thereafter the principle of natural justice that is demand being equal to supply the real realty prices may be transacted

The absence of a fixed income from the self employed is often falsely construed as the single most bothersome reason for banks and housing finance companies (HFCs) to refuse loans. While the salaried loan applicant may find obtaining a loan a cake walk courtesy his fixed income status the self employed loan applicant sans the proof of fixed income may not find the going as easy.

However it is merely a question of getting all the required documents in order. While the employed loan applicant can easily furnish proof of his income from an employer a professional cannot. Unlike the salaried loan applicant the self employed loan applicant will be unable to submit certain documents such as the latest salary slip or salary certificate revealing pertinent deductions.

So, the self employed applicant is asked to provide certain other relevant information. Professionals also need to submit documents determining the repayment and saving capacity such as the profit and loss statement the balance sheet for the past three years duly certified by a chartered accountant, income tax returns for the past three years etc. at the time of applying for the loan.

For businessmen the registration certificate under Shop and Establishments Act and factories act is mandatory. You also need to provide the registration certificate for deduction of professional tax and the certificate of practice if applicable if it is a partnership firm, a copy of the partnership deed has to be produced and in the case of a company a copy of the memorandum of association and Articles of Association will have to be produced.

There are also certain other documents that need to be submitted at the time of applying for the loan such as the net worth statements of the applicant or co-applicant, copies of LIC policy if any etc. The loan applicant may also need to provide particulars of family members such as name, age ,relation, occupation income and the likes. Besides the particulars regarding the guarantors like proof of income also have to be submitted.

The loan eligibility of the self employed loan applicant is determined by considering almost the same factors as in the case of his employed counterpart – repayment capacity, savings capacity and additional security like life insurance policies, shares or savings certificates. Also, factors such as the income of the spouse or other earning members in the family that could support the income of the professional are important.

The other relevant documents to be submitted for the loan are much the same as in the case of salaried loan applicants. The procedure for availing the loan is also the same for the salaried as well as the self employed loan applicants. The key lies in keeping all these documents in order to ensure that the loan comes through easily.

Excerpts from Times Property

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