As a self-employed individual, you know that your income can vary from month to month. This can make it difficult to qualify for a home loan. But, there are lenders who specialise in home loans for the self-employed.
In this blog, we'll discuss what you need to know about self-employed home loans in Australia.
Can You Get a Home Loan If You Are Self-Employed
Yes, you can. But if you're self-employed, you might find it harder to get a home loan than someone employed by a company. This is because lenders often see self-employed people as high-risk borrowers.
The lending criteria for self-employed people can be stricter than for those who are employed. Lenders will often require self-employed borrowers to have a higher income, a longer history of self-employment, and a lower debt-to-income ratio. They may also require a larger down payment.
What Are Self-Employed Loans
A self-employed home loan is a mortgage specifically designed for self-employed borrowers. Self-employed home loans typically have higher interest rates and stricter lending criteria than traditional home loans.
What Are the Documents Needed to Apply for Self-Employment Loans
As a self-employed individual, you'll need to provide your lender with the following documentation to assess your ability to repay the loan:
- Personal tax returns (2 years)
- Business tax returns (1 to 2 years)
- Bank and financial statements from your business (2 years)
- Australian Tax Office or ATO's most recent notice of assessment
You'll also need to provide a few additional pieces of documentation, such as your business registration documents and a business plan. This is to show the lender that you're serious about your business and that you have a plan in place to make it successful.
Once you have all the required documentation, you'll need to fill out a loan application. This will include questions about your business, your income, your expenses, and your assets and liabilities. Be sure to answer all questions truthfully and accurately, as any false information could result in your loan being declined.
Once you've submitted your loan application, the lender will assess it and make a decision on whether or not to approve your loan. If your loan is approved, you'll then need to go through the loan process, which will involve signing a loan contract and making regular repayments.
How Can You Improve Your Chances of Getting a Self-Employed Loan
That said, it is possible to get a home loan if you're self-employed. If you're self-employed and looking for a home loan, there are a few things you can do to improve your chances of being approved:
- Make Sure You Have a Strong Credit Score. A good credit score will show lenders that you're a responsible borrower.
- Have a Steady Income. Lenders will want to see that you have a consistent income. If your income fluctuates, be prepared to explain why and how you plan to make ends meet.
- Have a Long History of Self-Employment. The longer you've been self-employed, the more likely you'll be approved for a home loan.
- Keep Your Debt-To-Income Ratio Low. Lenders will want to see that you're not overextended. Try to keep your monthly debt payments to no more than 36% of your monthly income.
- Save for a Larger Down Payment. Larger down payment will show lenders that you're invested in the property and less likely to default on the loan.
- Get a Co-borrower. If you're having trouble getting approved for a loan on your own, you may be able to get approved with a co-borrower.
If you're self-employed and looking to apply for a home loan, be sure to follow these steps to ensure that you get a higher chance of getting an approved loan.
Wealthy You is an Australian mortgage company that offers self-employed home loans to help self-employed borrowers with their home loan applications. We understand that it can be difficult for you to provide the required documentation to support your application, so we have a team of experienced mortgage brokers who can help. We can also guide you on how to structure your finances to maximise your chances of success. Let us help you get the financing you need. Contact us to get started!