Applying for a loan can be challenging enough as it is, so borrowing money as a self-employed individual naturally comes with more complications and more questions. But with the right lender, you can rest assured your home loan will get the green light.
The struggle is only natural, as in most cases for self-employed borrowers, your income alone may not be enough to cover your repayments, so lenders will look at a combination of your pay, business income, and assets.
Whether you’ve already been turned down for a home loan or are just starting to research the concept of getting a mortgage, this guide will cover the ins and outs of self-employed home loans.
Not to mention, the differences in documentation compared to traditional employees make the application process even trickier, but that's where Wealthy You's Alt Doc Loans come into play.
What Is an Alternative Documentation (Alt Doc) Loan?
An alternate documentation (Alt Doc) loan is quickly becoming the most popular home loan choice for Self Employed or Contractor borrowers who have experienced difficulty in getting a normal bank approval.
In terms of lending, this type of mortgage is different because it allows you to present alternative documents, such as your pay slips, instead of the usual bank statements. Alt Doc home loans are only available to self-employed or contractors without traditional bank statements.
So long as you've been self-employed for six months, and can provide six months' worth of ABN registration and GST registration, you're eligible to apply for an Alt Doc loan. Additionally, you also need to provide six months' worth of business bank statements, or business activity statements.
Home Loan Application Tips for the Self-Employed
Tip #1: Show Proof of Income That Is Consistent and Sustainable
When applying for a home loan as a self-employed borrower, it's essential you have proof of income. This can include your last pay slips, invoices, bank statements, activity statements, and an ABN plus GST registration.
Tip #2: Improve Your Cash Flow
This is easy: make sure your working capital is adequate, and you are prepared for any unexpected expenses. If you're struggling to make your repayments, it's time to improve your cash flow. Track your expenses and adjust where you can, to free up some extra funds.
You can boost your cash flow by paying off any outstanding debts or reducing your payment terms.
Tip #3: Manage Your Inventory to Maximise Cash Flow
If you run a start-up business and have a limited operating history, lenders will be cautious about the growth of your inventory. It's essential you show that you have the ability to manage and sustain this growth.
Tip #4: Create a Financial Plan
Creating a financial plan is a great way to set clear goals and limits. Your plan should include a spending budget, as well as a financial forecast, which you can use to calculate your fixed expenses.
Now, you can create a plan to save up to pay your mortgage, with the added bonus of creating additional funds that can go towards your other goals.
Tip #5: Seek Help from Financial Experts
Getting a home loan as a self-employed borrower can be difficult, that's why it's recommended you seek the assistance of a financial expert. There are many types of financial advisors, and you can choose one who can help you through the application process.
The Bottom Line: Applying for Home Loans as a Self-Employed Individual
When applying for a home loan, getting turned down can be hugely disappointing. However, not all hope is lost. This is where The Wealthy You Alt Doc Loans can help. We have a range of home loan options that are accessible to self-employed borrowers, and best of all, we have an experienced team of brokers who can take care of the application process for you.
How Can We Help You?
If you're looking for the best mortgage broker in Sydney, you've come to the right place because Wealthy You is here to assist you in your home buying journey.
Wealthy You is one of the leading mortgage companies in Sydney, offering various mortgage solutions that meet every client's needs. Since we're alternative lending specialists, we provide restructuring loans in Sydney that make refinancing your home simple.
Learn more about our services today!