Getting a home loan for startup employees is not as difficult as touted by most. It’s true that the financial institutions have set a different process in place for sanctioning these loans from regular home loans seeked by salaried individuals. But the entire process is not all that challenging.
Self-employed and startup employees should keep in mind that lenders do not extend loans to such applicants unless they are thoroughly convinced of their repayment capacity. And it’s a job for the applicants to convince the lenders. To do so, you have to first understand the process and then take measures to smooth the home loan approval process.
Other than the common documents such as know-your-customer, a proof of your income is an absolute necessity. Self-employed people can have a number of sources of income like dividend, interest on invested capital, etc. and to show all these incomes in one document, all you need is the income statement submitted to the I-T department. Therefore, your ITR for last three years is required by lenders along with a balance sheet and Profit & Loss statement, which is attested by a CA. For business establishments, registrations and licence copies are also required.
The one thing all lenders need to be sure of is that the home loan is repaid on time. So, if you convince the lender with your strong business position and good cash flow, your home loan will be sanctioned in no time. You may have to explain the business model, business mix, actual margins, future ventures, etc. to the lender. Some lenders even ask for these in written form on a letterhead of your business. Beyond that, lenders also consider properties owned by you. They will also get a track record of your finances from your personal banker regarding working capital information and overdrafts.
Getting all your documents ready when applying for home loan is the best thing you can do since documents play a major role in the sanctioning of your loan. Make sure all your earnings, savings and tax returns are mentioned clearly in your financial records, leaving no room for doubt.
The home loan approval is also dependent on the fact whether you are a self-employed professional (CA, doctor, architect) or a self-employed business owner (retailer, shop owner, etc). Lenders are more favorable to self-employed professionals as they always have the option of landing a well-paying job just in case their business ventures fall through.