When lenders examine home loan applications, one of the main things they like to see is a stable income. This brings the question, “Is it possible to get a home loan even if I’m a casual worker or a self-employed person?” This guide aims to answer these questions to help you get the home loan that suits your employment situation.
Can a Self-Employed or Casual Worker Get a Home Loan?
The answer is yes! However, there are certain caveats to it. If you work in the gig economy and your paycheck varies from month to month, you’ll have a harder time getting in a lender’s good books than someone with a full-time job and a predictable income. This is because most lenders weigh applications through a risk assessment process. Not having a guaranteed stable income would be considered a lot less secure and risky to most lenders.
Loans for the Self-Employed
The first thing you can do to increase your chances of being approved for a home loan is to keep up to date financial records. This is because most lenders will ask for records of the last six months as proof of income. They will then require you to prove that you’ve been in the same industry for at least 12 months. So it works best to have a complete set of financial records for at least two years, just be sure.
Loans for self-employed individuals also require higher deposits because of the higher risks associated with the nature of their employment. Deposits vary from lender to lender as some will only lend up to 80% of the home value.
Loans for Casual Employees
Although it would seem as if casual employees may pose a risk to lenders, they are actually open to approving loans for those in the casual workforce. In fact, regulations for casual employees are much more relaxed than those of self-employed individuals. They can even borrow up to 90% of the property’s value.
For casuals, you need to prove that even though you are a casual employee, your income is stable. This requires you to present payslips for the last couple of months, especially if the hours vary. It’s essential to prove stability in your income and employment situation. Any months where no income is received will definitely catch the eye of the lender, which can definitely hurt your chances of being approved.
Requirements for Home Loans for Self-Employed and Casual Workers
When applying for a home loan, the requirements are pretty much the same as the requirements for someone with a full-time job. Your credit history, debt-to-income ratio, cash reserves, and income stability will all be scrutinised as well. The big difference is, you need to exert extra effort to prove that you are financially able to pay for a mortgage.
Self-employed individuals and casual employees have an uphill battle when it comes to applying for a mortgage. But there’s no reason to lose hope as it’s still very much possible to get approved as long as you maintain good credit and accurate records. If income stability is your weakness, then focusing on other criteria for loan approval should be your focus.
Wealthy You is one of Sydney’s premier mortgage brokers, offering hassle-free services to all our clients. As an alternative finance provider, we make refinancing your home simple and stress-free. Contact us today to take advantage of our flexible financing options.