Investing in a home is a big decision and requires a good deal of financial strategy. Planning out their dream home sentences most individuals to avail a home loan. While applying for the loan, one of the most important factors that lenders consider is proof of income. When income documents are detailed and precise, lenders check your ability to repay, assess terms of loan, and even eligibility. Today Finserv Consulting India specialists know the importance of documentation in the home loan application process.
Why do we need proof of income for home loans?
A bank will thoroughly check the income value of the applicant’s job as it plays an important role in deciding how much money they can give to the applicant as a loan. It helps banks determine:
- Your capacity to honor the loan payment EMIs with little stress
- The best loan sum you would be able to pay
- The duration of the loan and interest rates appropriate determined by the applicant’s financial status
- Emphasizing proven income documents greatly affects the swiftness of loan acceptance, while achieving goals of lesser loan rates and finer conditions still becomes attainable.
Proof of Income for Loans
The lender’s demand lists shall change according to the applicant’s category, meaning whether they are employed or self employed. Allow me to categorize.
Income Evidence for Salaried Employees
Banks are much easier with salaried employees as they require just two documents: salary slips and tax documents.
Pay slip
Pay slips for the most recent 3 to 6 months are required. The basic employers details alongside the gross and net salary needs to be written in the pay slip.
ITR or Form 16
A document given to you by your employer Form 16 serves to notify what amount was paid by your employer to you and what tax was taken from it. Alternatively, some lenders might ask you for ITR of the past 2-3 years as they would want to check if the income that is declared is indeed true.
Bank Statements
We require your bank statements for the past 6-12 months to validate salary credits as well as assess your overall financial stability.
Employment Verification
An appointment letter, employment contract or a certificate from the HR department confirming the job title and duration of employment will suffice.
Proof of income – Self Employed Borrower
More detailed proof of income is required for self employed borrowers due to the dynamic nature of their income. Generally, banks require:
Income Tax Returns (ITR)
The last 2 to 3 ITRs along with acknowledgements are required to validate consistency in income and assured taxes paid.
Profit and Loss Statements
As prepared by a chartered accountant, these statements reflect the business income and the expenditures incurred.
Balance Sheet
- A CA balance sheet certified by a CA indicative of a business of its financial health.
- Bank statement
- Personal and business bank statements for the last 6 to 12 months to monitor cash flow and expenses.
- Business Proof
- Business registration certificates, GST certificates or other relevant documents.
Additional income documents mortgage lenders may require
- Rental income as an example: Supplying rental agreements along with bank accounts containing said deposits aids in supporting loan eligibility.
- Supplements to Income: Other Forms of Income, like fixed deposits, dividends, or any form of regular income should be verified by documents such as bank statements and investment certificates.
- Proof of Spouses Income: Adding your spouse to the application as a co-applicant with their income proof can significantly raise your loan eligibility amount.
How Lenders Evaluate Income Proof
Lenders check the authenticity of the documents in relation to the claimed income and other factors such as the amount of income in comparison to the EMIs due for payment. Their focus is on the following factors:
- Consistency: Average monthly receipts by way of salary or income from business during the previous 1 to 3 years.
- Stability: Duration of employment or operation of the business.
- Net Income: Withdrawable amount by the employer’s office after mandatory deductions are made (for employees). Earnings after taxation (for self-employed).
- Debt Obligations: All current borrowed funds and other financial obligations, to estimate income to obligation ratio.
Suggestions to Help Strengthen Proof of Income for Approval of a Home Loan
Maintain Clear and Consistent documents
Make sure you have consistent and clear records such as payslips, bank statements, ITRs and other relevant documents as these should be free of discrepancies.
No Gaps in Salary Credit
Regular deposit of salaries reflects positively on employment stability.
Timely Filing ITR Creates Trust
Trust from lenders strengthens credibility, especially if it’s evident the money was spent elsewhere.
Bank Statements Clarity
Eliminate large movement of unexplained funds and ensure income sources such as salary have been highlighted.
Role of Today Finserv Consulting India Under the Home Loan Application Income Proof Submission
Providing assistive suggestions and checking documents for accuracy increases borrower chances of being accepted. At Today Finserv Consulting India, we help borrowers prepare and verify income documents prior to the submission of a home loan application. Our specialists assist you:
- Know what proof of income should be presented based on your employment profile.
- Gather documents and check for differences using some editing tools.
- Suggestions to enhance your income presentation for better loan terms.
- Communicate with the lenders to facilitate fast and efficient loan disbursement.
Conclusion
Proof of income is the most important part of a home loan application. No matter if you are an employee, a self employed professional, providing verified income documents will ensure that your loan gets approved.
At Today Finserv Consulting India, we do our best to make the process of obtaining a home loan easier by assisting clients with these income documentation guidelines. We offer bespoke support to ensure that you have a stress-free home loan application process.
