Here's how small shop owners can qualify for home loan despite irregular income

Financial institutions assess loan eligibility by taking a holistic view of business and financial stability rather than relying only on fixed monthly income.

Many self-employed individuals believe inconsistent income makes them ineligible for a housing loan. Today's Ask Wallet Wise query decodes how small business owners can still qualify and what lenders look for during evaluation.

Moneycontrol's Ask Wallet Wise initiative offers expert advice on matters of personal finance and money. You can email your queries to askwalletwise@nw18.com, and we will try and get a top financial expert to address your queries.

As a small shop owner with irregular income, can I still qualify for a housing loan? How flexible are lenders for people like me?

Expert Advice: Yes. Financial institutions today recognise the diverse income patterns of self-employed individuals, including small shop owners, and assess loan eligibility by taking a holistic view of their business and financial stability rather than relying only on fixed monthly income.

Key documents

Identity and address proof

Business proof: Shop licence, GST registration or trade licence

Income proof: Last two years’ Income Tax Returns (ITRs), audited Profit & Loss accounts and

Balance Sheets, and CA certificate (if applicable)

Bank statements: Personal and business statements for the past 6–12 months

Property documents: Title deed, approvals and sale agreement

Maximum loan-to-value (LTV) ratio

As per NHB guidelines, lenders typically finance:

• Up to 90 percent of the property value for loans up to Rs 30 lakh
• Up to 80 percent for loans between Rs 30–75 lakh
• Up to 75–80 percent for loans above Rs 75 lakh

Interest rates

Generally range from 7.35 percent to 12.50 percent, varying across lenders and applicant profiles.

Role of credit score

A CIBIL score of 700–750 or higher improves eligibility and helps negotiate better rates. A lower score may result in higher interest, additional collateral or the requirement of a guarantor.

Lenders’ flexibility for self-employed applicants

Banks and housing finance companies often consider gross receipts instead of net profit, offer tailored loan products for self-employed borrowers and allow co-applicants to enhance eligibility. Longer tenures may also be offered to make EMIs more affordable.

Prepayment and foreclosure

Floating-rate loans: Usually have no prepayment charges
Fixed-rate loans: May attract up to 2 percent of the outstanding amount as a fee

In summary irregular income is not a barrier to securing a home loan. Lenders today focus on overall financial health and repayment capacity, helping small business owners achieve their dream of homeownership.