A home loan can be yours even without monthly salary slip

5 MinsNov 12, 2020

Satish Patil, 35, is a construction contractor. He has a small-scale business renovating and repairing houses. He has saved up quite a bit and wants to buy his own home now. Satish has enough for a 30% down payment and needs to take a loan. He isn’t sure of the process or even if he is eligible for a loan, and is stuck because of lack of advice. He is under the impression he needs to show a monthly salary slip as proof to get a home loan. Since his income flow is seasonal and not regular, he is unsure whether he will get a loan. Let’s see how self-employed individuals like Satish can get a home loan.

salary slip


Self-employed categories

There are two categories of self-employed people. There are professionals like lawyers, chartered accountants, doctors, architects who have a professional qualification and have set up their practices.

The second category of self-employed people is people like Satish: traders, contractors, painters, and insurance agents, shop owners, among others who may not have a professional qualification but have their businesses.

Both groups of self-employed people are eligible for home loans from lenders.

What are the criteria for Satish to qualify for a home loan?

Satish needs to have the following proofs to get a home loan.

a. His business should be operational for at least three years.

b. Proof of income (IT statements, PAN Card, TAN Card, current account and savings account statements) for the last two years with certification from a chartered accountant

c. Personal and business bank statements.

d. Proofs that he has regularly filed GST (goods and services tax), TDS (tax deducted at source), and income tax.

e. He should be at least 21 years of age.

There are some additional requirements if the self-employed person is either a partner in a firm or director in the company. Since Patil’s is a proprietary firm, we will not get into that. But you can check them out by clicking here.

Interest rates are slightly higher for self-employed individuals, compared to salaried individuals. For further details on home loan interest rates, visit the website.

[Also Read: Home Loan Balance Transfer - All You Need To Know]

What are the other factors that the lender may consider before approving a home loan application for a self-employed person?

a. Age of the applicant: The younger the applicant, the better the chances of the home loan application being approved.

b. Before March 2020, he should not have defaulted or delayed his EMIs (equated monthly instalments) on any previous loan.

c. The amount of debt that the applicant is currently servicing: If Satish has multiple loans that he is paying off including personal loans, credit card bills and other EMIs, it reduces his chances of getting a home loan for the amount he wants.

d. A high credit score improves the chances of getting the loan approved. Hence, Satish should ensure that he can service his existing loans, if any, with ease and keep his credit card outstanding up to 30% of the total credit card limit.

e. Satish needs to showcase that his business is profitable, and he has proven ability to generate regular income.

f. Similarly, if like Satish the spouse is employed and becomes a co-applicant, not only do the chances of getting a home loan improve but depending on their joint income the applicants can get a higher loan amount as well.

Currently, interest rates on home loans are at historic lows, and anyone thinking of buying a home should capitalise on the opportunity. Axis Bank offers a range of home loan products suited to the needs of all its customers.

Disclaimer: The Source, a Mumbai-based content creation, and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.