Many people dream of owning a home, but getting a home loan sometimes demands providing proof of income, such as salary slips or income tax returns (ITRs). This can be difficult for self-employed people, freelancers, and those who do not have regular income documents. Fortunately, several banks and financial organizations offer home loans without requiring income proof, making it easier for persons in these groups to purchase a property. In this article, we'll explain what these loans are, how they function, what documents are required, and how to apply for one.

What is a Home Loan?

A home loan is essentially the amount of money you borrow from a bank or housing finance company with which you purchase or construct a home. The borrower must return this loan in the form of monthly installments known as EMIs (Equated Monthly Installments) over some specific time period that can be 10 to 30 years. It carries an interest rate which is added to the total amount you pay back. Technically, the property remains owned by a lender until the loan is paid completely since it acts as collateral. However, if one pays the loan entirely, they eventually own the house completely.

How Do Lenders Give Home Loans Without Income Proof?

Banks usually ask for salary slips or ITRs to prove your income and thus your ability to repay the loan. If a person does not have such documents, lenders will rely on other factors. Here are a number of methods that they decide if you are eligible for a loan:  
  1. Credit score: Your credit score reflects how trustworthy you are at repaying loans. A higher score (typically greater than 700) increases your chances of getting a loan without providing proof of income because it shows your financial responsibility.
 
  1. Assets: Banks will check the bank balance, savings, and investments to see if you have enough for the repayment even if you don't have a regular source of income.
 
  1. Co-applicant: If you are applying with a co-applicant who has regular income proofs, then the chances of getting the loan approved will increase. In this case, the bank naturally bears less risk.
 
  1. Property Value: The value that you pay for your own property also comes into consideration. Lenders determine if the house you want to buy has a value to justify the loan amount you're asking for. Higher property values can often make lenders feel more secure.
  While these methods may ensure loan security, it is worth mentioning that loans with no income proof may have somewhat higher interest rates because the lender bears a small amount of risk as well.

Eligibility Criteria for Home Loans with No Income Proof

Even without income proof, there are eligibility criteria you must pass to be able to get a home loan. It may differ depending on lenders but there are some common factors. The common factors considered for determining creditworthiness are:
  • Credit Score: You need to have a good credit score. Most lenders demand that you have a credit score over 700. This is an indicator that you are responsible, managing the loans effectively, and repaying the loans within time.
  • Asset Ownership: At times, the lenders ask you to present proof that you have enough assets, say a good bank balance or investment, to repay the loan.
  • Co-applicant: If you have a co-applicant, then that might be a very good reason why they would approve the loan, considering that they may be earning and showing a source of income.
  • Age: Maximum Limit Up to which age one can pay for his/her home loan is about 70 years. So, your age, at the time of application, also plays a role.

Documents Required for Home Loans with No Income Proof

Even if you are not asked to present some proof of income, you will still have other forms of proof that you're presenting with your application. Normally lenders will demand the following documents:
  • Bank Statements: Most of the lenders require you to provide bank statements. Ideally, most of them should be up to date. They want to see if you have savings, or if there is money within your account.
  • Property documents: These will contain documents proving ownership of the property or an agreement to purchase it.
  • Credit report: Carry a copy of your credit report as it gives credit scores and any existing debts or loans against your name.
  • Asset proof: Documents showing other assets such as mutual funds, fixed deposits, or property can work in your favor.
  • Co-applicants Proof of income, if applicable: If you have a co-applicant, then the applicant's salary slips or income tax returns would be required.

How to Apply for a Home Loan Without Income Proof

Applying for a home loan without income proof is not that complicated after all. Here is a simple procedure to follow:
  1. Identify Lenders who give loans without income proof: You do not borrow from everyone in the market. Instead, you find lenders who provide loans without income proof. Non-banking financial companies (NBFCs), or private financiers, for example, frequently provide loans without requiring proof of income.
  2. Find out if you are eligible: Once you have the list of lenders, find out what their minimum credit score requirement is, as well as your overall financial situation, and whether it matches with theirs or not.
  3. Document collection: Collect all the copies of all documents you require such as bank statements, property documents, and credit reports. If you apply with a co-applicant, ensure that all his/her documents are available too.
  4. Submission of Application Form: All, usually, is likely to be made online. It is also possible to submit a particular application through one of the lender's branches. Make sure you assemble and prepare all the required documents that must have been completed, and ready for before you submit them with the application form.
  5. Loan approval/disapproval: in this process, the loan is either approved or disapproved. Upon going through your application, the lender will then decide to either accept or reject your loan request depending on the value of the property being bought and according to your financial profile. If approved, the loan amount will be disbursed based on the agreed terms.

Conclusion

Although getting a home loan without showing income is difficult, it still doesn't mean you can't get one if you have good control over your finances with an excellent credit score. You can show this by having sufficient assets and, if necessary, a co-applicant to increase your chances of being granted the loan. Simply compare lenders and their offers to get the best one for your needs.