Home Loans for Self-employed

Finding a home loan when you’re self-employed

There are many perks to working for yourself, but when it comes to applying for a home loan, it seems being your own boss can make the process of applying for a home loan more complex with banks and other lenders. Why? A salaried employee has a regular, steady income and is less likely to experience the cash flow volatility of a small business owner, contractor, entrepreneur, tradesperson or freelancer.

Yet by being proactive and accessing specialist advice, self-employed applicants for home loans can also enjoy a successful and hassle-free road to securing a home loan. Try these top tips for starters.

1. Seek expert advice

Trying to navigate the home loan landscape for self-employed may not produce the outcome you desire. There are many experts who can help self-employed people access a home loan, and a mortgage broker is a good first port of call. They will be able to provide you with an up-to-date overview of which lenders on their panel are most comfortable lending to the self-employed, and also explain what sorts of loan products are available. A mortgage broker can also provide valuable advice around the sort of documentation you will need to have ready before you submit your application.

2. Get your affairs in order

Many lenders will lend to self-employed borrowers who provide their full business financials. This generally includes your personal and business tax returns for the past two years. If you have these documents on hand – and they reveal a fairly consistent income – applying for a loan should be relatively straightforward. The hectic schedule that comes with running your own business means many self-employed borrowers’ tax returns are not up to date. If you have time on your side, consider working with your accountant to lodge your outstanding returns. If you’re in a hurry, you may wish to explore the option of applying for a low doc loan.

3. Do your homework

Checking your credit history is a good step for anyone applying for a home loan. If you’re self-employed, it’s definitely worth taking the time to make sure your credit history doesn’t include any defaults or errors – these can hold up your loan application if they are not rectified in advance.Taking the time to work out exactly how much you’d like to borrow is also a good idea. That way, you can hit the ground running when you meet with lenders or your mortgage broker.

4. Type of loan

In Australia, there are a number of ways to structure your home loan repayments (fixed, variable, split). When you are self-employed it is important to find the best option may save you time and money on your mortgage. A mortgage broker can help you choose the repayment structure that works best for you.

5. Think outside the square

When you are self-employed it may be possible to apply for a home loan using a Certificate of Income Declaration – a document that verifies your income and is signed by your accountant. It’s wise to consult a mortgage broker before applying for a loan in this way, as he or she can advise which lenders will accept an income declaration. It should be noted, however, that applying for a loan using such a document may mean that the required LVR (the portion of the property value you can borrow) may be lower, so you may need a larger deposit.
Getting a home loan can be easier than you’d imagined with a mortgage broker in your corner. Speak to your broker to find out how a broker could help you secure a home loan.