Things self-employed people need to know about home loans

There has been a growing predominance of self-employment, as individuals have shifted to freelancing from regular 9-to-5 jobs. While getting a home loan can be easier for salaried employees, self-employed individuals can also procure these by producing the required documents. This article shall provide a detailed guide on how to get home loans for self-employed professionals. 

Challenges of self-employed professionals in getting home loan approval 

It is always challenging to get a home loan for self-employed individuals. A major reason is the lack of job stability and security. Banks and lenders prefer applicants with stable jobs and a fixed income, which is not commonly seen among self-employed professionals. Moreover, such people usually get their payments on a project by project basis, which might reflect inconsistent income in the presented documents. 

As housing loans include a large sum of principal, the processing of applications can be stringent. Therefore, in most cases, lenders reject home loans for freelancers and entrepreneurs. If there are income fluctuations in the last three-year income proof, it might get challenging for an applicant to get loan approval. Apart from that, borrowers must meet various other conditions in this process. 

Tips to get a home loan for self-employed professionals

A few tips might make the home loan process easier for self-employed professionals. These are as follows. 

Making larger deposits and down payments 

While taking a home loan, borrowers must make a portion of the property’s value as down payment. If this amount is hefty, the actual loan amount will be less. For example, if self-employed applicant deposits 40% instead of 20%, this means the borrower is financing a smaller part of the loan, making approval easier. 

Submitting correct documents 

Documentation is one of the most important steps to get a home loan. It is easier for salaried individuals to submit payslips, income details, tax returns etc. Self-employed professionals must update their bank accounts and maintain income records and IT proof. The account details of at least the last two years should be maintained, which include balance sheets, profit and loss statements, income records, etc. 

Improving credit score 

The credit score of borrowers can be an important factor in home loan eligibility. Lenders check the credit score of borrowers, and can end up rejecting credit to those with low score. Hence, self-employed applicants must keep a good score by paying all EMIs on time or avoiding check bounces. In this regard, they should also know how their credit score will affect the EMIs they need to pay. 

Related Post: Overview of a Home Loan Calculator and its Uses

Reducing debt to income (DTI) ratio

A DTI ratio is the ratio between an individual’s earnings and expenses in terms of loan EMI per month. Lenders often check this ratio besides the credit score to determine the repayment history and capacity. Taking a home loan will only be feasible when they can pay the EMIs with a stable income. Calculating EMIs before taking the loan can be a wise option. Borrowers should know the benefits of calculating EMIs before taking a home loan.

Getting a guarantor 

Lenders are often sceptical of the repayment capabilities of freelancers and entrepreneurs. Thus, if they come up with guarantors, the level of security increases. They can find someone who approves of their financial activities and loans. With a strong professional and economic history, the guarantor can convince the lender about a borrower’s capability to repay the loan. 


Leading financial institutions extend pre-approved offers to help streamline the processing of loan applications. These offers are available on various products like home loans and loans against property. Borrowers can check their pre-approved offers by entering just their names and contact details. 

In conclusion, it can be stated that producing the required documents and meeting the eligibility criteria can be beneficial while getting home loans for self-employed professionals. Getting a home loan can be challenging for freelancers and entrepreneurs. They, therefore, need to check multiple factors, including the current home loan interest rates. Moreover, maintaining all the financial records and documents over time can benefit them.