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(Part 2) Housing loan checklist: 4 documents you need to prepare if you’re a self-employed person


Buying a house as a self-employed person can be more challenging than a regular salaried individual but that doesn’t mean it’s impossible. You can get a housing loan with the right documentation.

home loan for self-employed in malaysia
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A self-employed individual refers to a person who is a freelancer or a business owner. They enjoy another level of work freedom and flexibility compared to people who do a nine-to-five job. While being self-employed comes with a lot of perks, it has its drawbacks too. In general, getting a loan approval can be more challenging than people with stable and consistent month-to-month income. Proving your income stability requires documentation and other qualifying criteria but as long as home loan eligibility requirements are met, you’re already one step closer to owning your dream home. 

READ: (Part 1) Housing loan checklist: 4 documents you need to prepare if you’re an employed person

How do you buy a house if you are self-employed

If you’re self-employed and considering buying a house, you may book a property and apply for the same home loan as other homebuyers (a regular salaried person). Banks will review your application based on your credit history, credit score (CCRIS and CTOS reports), Debt Service Ratio (DSR), and your earnings. However, since you’re self-employed and may earn irregular income, banks will require you to submit a proper financial record or track of income to ensure you have a history of uninterrupted financial strength, and generate sufficient income in the future

How can I get a home loan without proof of income

It is impossible to get a housing loan without proof of income as there’s no guarantee for income stability and repayment capability. 

Housing loan for a self-employed in Malaysia

Buying a house is a much trickier process if you’re a self-employed person. In Malaysia, schemes such as BSN MyHome (Program Perumahan Rakyat) 2021 assist people who are self-employed or with irregular income to own a home. Malaysian freelancers and first-time homebuyers may check this housing loan offered by Bank Simpanan Nasional Malaysia (BSN) to find out the eligibility requirements

How can a self-employed person get a home loan

Proving and documenting your income history might be quite difficult. However, don’t worry as there are a few steps that you need to take note of to make yourself a more attractive home loan applicant and increase your chances of getting a mortgage approval. Let’s go through the housing loan documents checklist in Malaysia for self-employed people, and what other things to be done to qualify for a home loan. 

What are the documents required for a housing loan

Unlike salaried people, self-employed do not have a regular payslip. Banks will review your financial stability before approving your home loan application. As a self-employed person, banks may perceive your income as ‘unpredictable’, therefore you might not be able to commit to the monthly repayments. Here’s what you need to do to get a better chance at qualifying for a mortgage. 

1. Financial records of past years’ income, tax return statement, balance sheet

You’re more likely to increase your chances of a home loan approval if you can provide an organised financial record of previous years’ income, tax return, profit and loss statement, and balance sheet. If you’re a business owner, make sure that your business is registered with Suruhanjaya Syarikat Malaysia (SSM) and keep all statements, documents, and licenses. Label all folders according to the latest dates or assessment year so it’ll be easier for you to provide your proof of income when asked by the bank or financial institution. Also, do a simple housing loan calculation to get an overview of how much money you’ll be borrowing from the bank, and how much is your monthly repayment amount. Use LoanCare, our home loan eligibility indicator to do your home loan calculation and compare your options with up to 17 banks.

2. EPF statements

    It may not be compulsory for freelancers or self-employed to open an Employees’ Provident Fund (EPF) or KWSP account but having one will help you financially after retirement and strengthen your financial record. From the bank’s perspective, making regular EPF contributions shows that you have a stable source of income, just like salaried people. Other than being a retirement fund, you can use your EPF Account 2 money to buy a house or pay student loans. Did you know there are 16 types of EPF withdrawals?. There are also EPF i-Sinar and EPF i-Lestari withdrawals for those who are financially stricken due to the COVID-19 pandemic.

    3. Income tax statements 

    A lot of freelancers or self-employed may not declare their earnings to the Inland Revenue Board of Malaysia (IRBM) or LHDN. But did you know that the last 3 years of your income tax statements are extremely useful when it 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). 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. Credit score report

    Banks or financial institutions in Malaysia have their method of evaluating your credit score. As credit score indicates a consumer’s credit risk, banks will refer to two popular credit reports, CCRIS and CTOS to assist their evaluation. A good credit score will make you a more attractive candidate for a loan, you can get better interest rates and even quicker loan approval. If you have a credit card, it can be a good indicator if you have a healthy credit score, or if you pay your credit card balance on time. Be sure to not max out your credit card limit and never miss out on your monthly payment.

    Other than documents, you will also need to:

    • Get a guarantor 

    A credible guarantor must be someone who has a strong financial background. It can be anyone; your family members, relatives, and even close friends. This person will be evaluated based on his or her income stability, employment background as well as a credit score to minimise your risks and liabilities as a self-employed person. When having a guarantor, make sure that you pay your monthly instalment on time to avoid tarnishing your guarantor’s credit record or making him or her bearing legal consequences due to your irresponsible act. 

    • Apply for a home loan with banks that lend to self-employed borrowers

    Banks are very ‘picky’ when approving an application. Before applying for a housing loan, take your time to research banks that approve loans for self-employed individuals and find out the interest rate on house loans for each bank. Here are some of the banks that offer home financing for self-employed applicants:

      • CIMB Property Financing 
      • Bank Rakyat Home Financing-i
      • HSBC Ideal Home Plan

    READ: 10 best-selling condominiums in Malaysia for 2020

    With interest rates at an all-time low, now may be the best time for Malaysians who are considering homeownership to take a deeper look at their options. You may check government housing schemes available for B40 and M40 groups or government housing loans (LPPSA) for civil servants in Malaysia. Good luck!

    Edited by Rebecca Hani Romeli

    Disclaimer: The information is provided for general information only. Malaysia Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

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