Are you self employed and looking at getting a home loan to buy your first home? Self-employment can be a great way to earn your own income and be in charge of your own destiny, but it does come with some extra considerations when it comes to taking out home loans. Luckily, there are plenty of lenders who will work with you even if you’re not employed in a ‘traditional’ way.

In this blog we will share with you what you need to know about self employed home loans and how a mortgage broker can help you advance your application process.

Getting a mortgage when you are self employed

Lenders often see self employed borrowers as representing higher risk because their income is not stable. Hence when applying for a mortgage for self employed, they require you to provide extra documentation and may scrutinise your application under stricter criteria. 

However, self-employed borrowers shouldn’t despair – there are options available, and with a little bit of preparation, it is possible to get approved for a mortgage. 

Applying for a self employed home loan Australia

How to get a mortgage if self employed? To get started, we recommend that you talk and work with a mortgage broker. Self employed people often have irregular income, which can make it difficult to qualify for a traditional mortgage; but mortgage brokers will know how to assess your situation and be able to help you navigate the lending process. 

Next, decide between buying a home to live in and a residential investment property. Then, you have to demonstrate to lenders consistent income, business growth (if you own one), and a long-term trend of increased profits. For this, you will need to prepare true and accurate paperwork on your:

• Last 24 months of tax return of your business
• Notice of tax assessment
• Profit and loss statement
• Savings history
• Letter from your accountant
• Personal tax returns for the last 24 months
• Date of ABN and GST registration
• Outstanding loans (e.g., car loans, personal loans, credit cards, etc)
• Existing assets (including superannuation)

If you only became recently self-employed for less than a year, your options will be severely limited as you don’t have enough tax returns to prove your income. Lenders see this as some form of financial uncertainty. In this case, lenders may look at your income from your last employment and consider that proof of your borrowing capacity to qualify for home loans for self employed.

If you’ve been self-employed for one to two years, you may look into low doc home loans and ask your mortgage broker to liaise with low doc home loan lenders.

What is a low doc home loan?

A low doc home loan is a type of self employed mortgage that accommodates borrowers who are unable to present the standard required paperwork, e.g., lodged tax returns or financial statements. Instead of providing these documents, they will be asked to to sign a declaration outlining their earnings and present:

• business activity statements (BAS);
• bank statements; 
• and/or an accountant’s letter to verify the stated income.

Do note that because there is an increased risk in this type of loan as perceived by lenders that offer this, it may come with a higher-than-average interest rate and more limitations in terms of maximum LVR (loan-to-value ratio) – meaning you can only borrow for less.

A low doc home loan can be a real game changer. But to truly maximise its benefits, it is best to sit down with a seasoned home loan broker to work out your net income and the amount of loan you can realistically afford to commit to. In addition, mortgage brokers have access to a wide range of lenders and products, so they can help you find niche mortgage products and lenders you may not even heard of before. 

Let the mortgage brokers at Stryve Finance help

So, whether you’re a freelancer, contractor, small business owner or just don’t have a traditional job title, don’t worry – there are plenty of lenders who will work with you. 

At Stryve Finance we understand the unique challenges that come with being self-employed, and our mortgage brokers are more than happy to help you find the right loan for your needs. 

Give us a call today to fast track your home buying journey!