Getting a home loan when you’re self-employed can be tricky, especially with all the documentation that’s required. Most banks will make you jump through hoops when applying for a home loan, however, that’s not to say all self employed borrowers will struggle to get finance.
Here is a breakdown on how to get a home loan when you’re self employed.
Know Your Numbers
To boost your chances of getting an approval, you’ve got to make sure you know your numbers. Sit down with your broker and establish what taxable income level you need in order to apply for a loan. Once you’ve established your borrowing power & determined eligibility for finance, you’ll need to prove that your income is what you say it is. So make sure you have all of your paperwork in order. Your broker will be able to tell you what is required, so don’t worry!
When assessing a self employed applicant’s eligibility for a home loan, lenders look for consistency of income. They want to see that your business has been ticking along steadily and maintaining a level of income that is suitable to meet their minimum servicing requirements. To confirm this, the lender will request your most recent personal tax returns, usually two years’ worth. If there is a large fluctuation between taxable income for the two financial years, the lender will generally utilise the figures that relate to the lower of the two, even if that is the older statement.
Make sure you shop around rather than going to the same bank where you have your savings or business account. The bank have an upper hand of the convenience factor for you, meaning you won’t receive the best deal on offer. If you visit a mortgage broker, they will be able to compare hundreds of home loan options from their range of lenders on panel. Otherwise, if you opt to go to a bank for your home loan, ensure you visit a few lenders to gather their fact sheets before you press the green button. It could save you thousands.
Consider a Low Doc Loan
You may be able to secure a Low Doc loan, which is where lenders look at a different set of financial measures to assess your application. This could be a good option if your business has been operating for less than two years. In order to be eligible for this option you will need to be self employed for at least 12 months, have an Australian Business Number & have your Business Activity Statements in order & verified by the ATO for the past year. In saying this, ensure you speak with your broker or bank before you decide this option. As every financial situation is unique, there may be a more suitable finance option for you & your business.
For more information on getting approved for a home loan when you are self employed, speak with a home loan expert from Irwin Financial Solutions. Paul Irwin, Director of Irwin Financial Solutions has over 20 years’ experience in the industry & provides a honest, unbiased & comprehensive service to all of his clients. Call Irwin Financial Solutions today on 0402 022 447 to discuss your options.