Acquiring a home loan can be quite difficult, especially for those self-employed. Instead, many lenders are looking to see a stable employment record.
As a self-employed individual applying for a home loan, you’ll need to provide tax returns and letters from your accountant to meet most lenders’ expectations. Furthermore, these lenders may still ask for proof that you’ve worked successfully for yourself for at least two years. A few bad months could signal your inability to meet repayment obligations. It’s often an unpredictable risk that many lenders simply won’t gamble on, so it’s crucial that you prove to lenders that you’re a safe investment.
Luckily, there are still other alternatives when trying to get your dream home loan, requiring a few extra steps in the application process. And with many Australians increasingly running their own businesses and opting into self-employment (such as freelancing), getting a home loan may not be as difficult as you think!
What do Self-Employed People Have to Do Differently?
If you’re self-employed and want to apply for a home loan, you’ll need to provide evidence of your business’s financial position. In addition to the standard home loan paperwork of personal financial information (including employments, savings history, outstanding loans, current assets), self-employed people must prepare additional paperwork:
- Last two years of company tax returns
- Last two years of other financial statements (e.g. profit and loss statements)
- Last two years of personal tax returns
- Date of ABN and registration
Ultimately, you must demonstrate to financial lenders that you have consistent income, solid business performance and growth, and a long-term trend of increased earnings. It’s also important that your financial records are updated and accurate since it will further help you and your lender to make the right decision.
What if You Recently Became Self-Employed?
If you’ve been working within a particular industry for several years, but have only recently begun working for yourself for a year or so, then you could potentially apply for a low doc loan (i.e. low documentation) – this refers to special consideration that can be applicable for those being in the same line of work for many years, even if your financial records are relatively limited. However, it’s important to note that not every lender may allow this.
For many self-employed people, it’s not easy getting a home loan approved. To find the right home loan and improve your chances of getting your application greenlit, don’t hesitate to get in-touch today!