Unlike salaried people, self-employed do not have a regular
So how do you get your home loan application approved?
Self-employed borrowers will have to provide more paperwork
to document income when compared to traditional employees.
But, getting a loan when you’re self-employed is not
Follow our tips on how to increase your loan approval
chances when you’re self-employed below and you just might your loan application
1. Keep proper financial records.
You should maintain your financial accounts not just for the
sake of a loan but for the overall management of your business.
A good track of your profits and losses, expenses and incomes,
will make it easy for banks to estimate your level of affordability (Get your Home
Loan Eligibility report).
Keep a folder for all your important financial documents,
such as income tax documents, business banking statements, as well as
other proof of income.
Well-maintained records (showing healthy, regular earnings)
indicate to banks that you can manage your finances well.
2. Contribution to EPF.
It helps to strengthen your financial track record to the
eyes of the banks and lenders.
By doing so, it help your lender identify that your finances
are stable enough to repay future commitment, as well as letting them know that
you care about your monetary future.
Try to deposit every month to show steady income making
regular EPF contributions shows that you have a stable source of income, just
like salaried people.
3. Declare income taxes.
Do you know how useful is your last 3 years income tax
statement when comes to getting a home loan approval?
Declaring your income also means your annual earning exceeds
RM34,000 (after EPF deduction) or earns income from a business (through gains
or business profits).
If you want to buy a home with a bank loan, do declare
everything and pay your taxes in full and on time.
You may use the BE form to file your income tax if your
freelance work isn’t registered as a business, while a registered company or
business will require you to file taxes with Form B.
Remember, you could be penalised with fines, imprisonment,
or both if you fail to declare your taxable income.
4. Get a guarantor.
He or she should be someone who has a solid employment and
financial record, as well as a healthy credit score to help reduce your risks
as a self-employed applicant.
Getting yourself a guarantor can reduce the risk and
liability you pose as a self-employed individual, who has a strong financial background could help boost your loan
Just be sure to make your loan repayments on time so that
you won’t damage your guarantor’s credit record.
5. Show financial strength.
Strong finance strength if you have excellent credit history
by using a credit card, a good record of timely payments enhances your
Consider pledging collateral, in the form of other
properties or financial assets like stocks, bonds, or a life insurance policy
(promising absolute assignment to the lender).
Additionally, if you can put down a greater deposit,
you’ll improve your chances with a lower borrowed amount.
While you work on strengthening your position to get your loan approved, take note of other matters that could equally hurt your chances:
Don’t rack up credit card bills or default on your
borrowings in any way. These are red flags that will affect your credit status
and severely hurt your chances of getting financing.
If you indeed have loan defaults or are in arrears, make
sure to clear them off completely and wait 12 months (CTOS can hold debt
information indefinitely) before applying.
Perform a self-check with us and CCRIS before applying for your loan and if there are
any discrepancies, do contact them to seek clarification and rectify the issue.