While submitting the application form for a home loan, banks will ask for documents to establish your income.
This will need to be backed up by proof such as copies of last three years’ I-T returns (along with copies of computation of income/annual accounts, if any), Form 16/Form 16A, last three months’ salary slips, copies of the last 6 months’ statements of all your active bank accounts in which your salary/business income details are reflected, etc.
For self-employed persons, if the income has increased dramatically in the past year, it might be advisable to have your explanation ready as to why you think this is a permanent increase in your income, rather than just a one-time aberration which may decrease in future.
The reason is that if the bank is convinced with your explanation, then the loan amount you are eligible for loan eligibility can be considered in relation to the latest income rather than considering the much lower average income.
For salaried employees, if the income has increased since the last financial year as shown in the latest salary slips, such increased salary can be taken into account for loan eligibility purposes.
Your bank statements are scrutinised for:
Level of activity: In the case of self employed persons, this gives a very good clue about the extent of business activities.
Average bank balance: A cursory glance at the average bank balances maintained in a savings bank account speaks volumes about the spending/saving habits of any individual.
Cheque returns: A small charge debited by your bank in the statement indicates that a cheque issued by you was returned by your bank. Many such returns can have a negative impact on your loan sanction.
Cheque bounces: If cheques deposited by you are returned by the issuer’s bank, they will be visible in your bank statement. Banks have specific norms as to how many such returns are acceptable in a period of 1 year.
Periodic payments: The existence of periodic payments to other finance companies/bank etc indicate an existing liability and you will need to provide full details of these liabilities to the lender.
Age proof: Your age proof will need to be submitted such as school leaving certificate/driving licence/passport/ration card/PAN card/election commission’s card/etc.
Current address proof: Similar documents.
Identification proof: Same as above, but with photograph. Sometimes, the same document, if it contains a photograph, the current residential address and the correct age can be proof for all 3 things.
Your employment details: If your company is not well-known, then a short summary about the nature of the company, its business lines, its main customers, its competitors, number of offices, number of employees, turnover, profit, etc may be needed. Usually, the company profile that is available on the standard website of the company is enough.
Your investments: This helps the bank to estimate your ability to pay the down payment as well as your savings habit.