Home loans are the vital force that bridges our dream of owning a home to reality. But to avail a home loan, one has to qualify for it. All hosing financing companies follow some certain guidelines to find the creditworthiness of an applicant. Among many, one criterion of home loan eligibility is – employment.
Lenders check the employment status of the applicant before sanctioning a home loan. If you are a salaried employee, getting a loan becomes easy as you have a fixed source of income. But if you are a contract based employee, the eligibility checking takes a few more steps. The lender takes a few more measures to find the loan eligibility of the applicant. Our today’s article is an insight on how lenders evaluate the creditworthiness of a contract based employees.
Contact-based employees can also avail a home loan. But not in all conditions. Here we have put up some scenarios to understand the home loan availability of contract based employees.
Joy, a young professional who has just completed his graduation and joined a job on a contract basis. Though it is his first job, he is earning well enough to meet the eligibility criteria of a home loan. In such conditions getting a loan seems to be difficult as he is in his first job. No prior work experience may work as a negative impression on the lender. As Joy has no work experience, the termination of the contract may leave him unemployed. So, in those situations, the loan application has high chances of getting rejected.
Jiten holds his degree in Chartered Accountancy and joined his first job as a contract based employee. If Jiten applies for a home loan, there is a high chance of getting approval on the home loan because of his high qualification. In such situations, lenders generally assume that even if the contract expires after a year or some months, getting another job will be easy with such a professional degree. So getting a home loan for Jiten will be easier than Joy.
Ganeshanan is a software developer and working for a multinational company on a contract based job. He has five years of experience in the same field and drawing a quite good amount of salary. If Ganeshanan applies for a home loan, he will get it easily. The factor which supports the approval of home loan is the work experience he has. The lender will assess the creditworthiness of Ganeshanan with the continuity of work, the continuity of employer, credibility of the employer, past appraisals or profits etc.
The next scenario is of Amit’s, who has 5 years of work experience and presently working as a contract based employee. But at the time of applying for the loan, his age is 40 years. Though he has quite good work experience, getting a loan will be challenging as until his mid-age he is working as a contract based employee. Such situations may make the lender suspicious on the past work life of the applicant. This can be a negative impression and turn to be a hindrance for the approval of the loan.
To Sum Up
Being a contract based employee, it is not impossible to get a home loan. But the eligibility criteria is slightly stringent as compared to salaried employees. If you are a contract based employee, it is strongly recommended to check the eligibility criteria or talk to the lender before you apply for the loan. The employment status is not the only criteria to gauge the creditworthiness of an applicant. Your credit history, age, relationship with the bank etc. also matters when it comes to getting approval on your home finance application.