Things self Employed People should Take Care While Taking a Home Loan
Jun 12, 2018 Home Loan
If you have your own business, you are independent, you do what you like, and you are your own boos. But all of these come with lots of challenges such as getting a loan if you are investing in a home. There are several cases wherein self employed face problem in getting the home loan as at the time they are not able to clear the lengthy process of banks which they do to check the person’s eligibility.
So we have listed some challenges that a self employed individual while applying for a home loan
So we have listed some challenges that a self employed individual while applying for a home loan
Irregular income
Lenders usually evaluate the borrower’s income while processing the home loan. But as self employed people have inconsistent income; this becomes one of the key reasons in case of self employed individuals that the lenders do not approve giving the loan to them. There is no monthly income for self employed people, some months have a good income, and some months have nothing, depending on the business. This keeps banks away from the application of self employed people seeing the borrower’s capability of paying a fixed equated monthly instalment (EMI). In such case, the bank approves the home loan to those who are able to give the large amount in down payment that will ensure they have to pay a smaller EMI.
No record books
It has been seen that people who have their own business do not register it and thus do not keep any record books. While processing the home loan application, banks check income proofs, record books, and tax fillings proofs of the past few years to be ensured that the borrower is capable of paying back the loan in the form of monthly instalments. The banks might ignore a year or so but they cannot accept that there are no record books. To have a smooth home loan process, it is better to keep all the books recording all profits and losses over the years. If you cannot do it yourself then you can hire an accountant to do the job for you.
Inconsistency in tax filing
Many self employed individuals do not file their tax regularly which can be a major in late stages such as while applying for a home loan. The taxpaying capability of an individual is a proof of income of an individual. Banks usually check the tax returns of the past two years to confirm about the income. So the self employed person should be regular in paying tax and keep all the important documents intact such that the home loan process gets smoother and hassle free.
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