It is pretty much tricky and difficult to procure a home for freelancers and gig workers

The clear mandate for a home loan application for the longest time has been – salaried candidate, regular payslip, F-16, ITR papers, etc. “While these criteria are preferred by most lenders since they make it easier for the lender to ascertain the ‘payment capacity of the borrower’, it is not the only tenet of ascertaining creditworthiness. Other important factors are ‘intention to repay’ and ‘asset quality/security. And these work in favor of those who don’t have stable salary statements,”.

There are some special requirements when you apply for a home loan as a self-employed person:

· Must have work experience of at least three years through which income has been earned, and a proof of income shared; 

· Must have a positive net worth as per the net worth statement;

· CIBIL score of 750+ will help you get more lending options;

· Must possess a valid professional license, if there is any in your profession.

Upward Trend in the processing of lending to self-employed and freelancers.

Lenders are now starting to accept that there is a growing market of self-employed people and freelancers and they may not have a stable monthly income. Lenders have realized that jobs like a wedding photographer, coder, graphic designer, as well as several others are seasonal and while there may be a few months where they earn well, there could be a few that don’t go as well. “Thus, nowadays some new-age HFCs/NBFCs now provide home loans to freelancers at competitive rates. Instead of the age-old custom of looking at income documents of the borrowers, they now understand the nature of their business to ascertain the consistency of income. Age-old banks also changed their assessments ways with self-employers earning patterns.

The methods lenders use to determine repayment ability include cash flow analysis, banking surrogates, repayment track-record, industry margin method, income-expenditure method, etc. 

Technology plays a crucial role in assessing income

 With the advent of technology and data science, some solutions help test creditworthiness without having to depend on formal income documents, monthly salary, or traditional credit underwriting. “Use of non-traditional credit parameters as a deciding factor based on data science algorithms are being experimented with by FinTech enabled lenders. The use of credit scores, EMI reflected in bureau reports are also being experimented with as a tool for assessment of the repaying capacity. Algorithms based on the same are applied on the informal income profiles to determine loans,”

How can one apply for a home loan without a salary slip?

 Any individual has to gather all the documents before applying for the loan. Earning receipts, invoices, agreements over the last six-12 months. These would act as your proof of income,”. Having all your documents and information in one place will give you a fair assessment of where you stand financially even before applying for a loan. You would also need to make a note of expenses, and separate work expenses from personal ones. If you have assets under your name, that would be helpful. Some financial institutions may lend you, even if you are not earning a consistent income, basis your asset value and its financial strength.

The biggest problem we face is a lack of proper documentation. A few organized players provide receipts and invoices while smaller jobs just directly transfer money into the account without a paper trail. To provide proof of income on these transfers is difficult.”

Challenges and Difficulties

 The biggest challenge freelancers face when applying for a home loan is their inability to provide enough documentation on their income-earning patterns, and a strong projection for likely future income earned. 

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