There are many perks to working for yourself, but when it comes to applying for a home loan, it seems being your own boss sends up a red flag to banks and other lenders. Why? A salaried employee has a regular, steady income and is less likely to experience the cash flow volatility of a small business owner, contractor, entrepreneur, tradesperson or freelancer.Yet by being proactive and accessing specialist advice, self-employed applicants can also enjoy a successful and hassle-free road to securing a home loan. Try these top tips for starters.
1. Seek expert advice
2. Get your affairs in order
However, the hectic schedule that comes with running your own business means many self-employed borrowers' tax returns are not up to date. If you have time on your side, consider working with your accountant to lodge your outstanding returns. If you're in a hurry, you may wish to explore the option of applying for a low doc loan.
Low doc loans are offered by a wide range of lenders and, as the name suggests, require less documentation than traditional loans. Many low doc loans only require 12 months of business activity statements instead of full financials, for example. A downside of some low doc loans is that they may only be available at a lower loan to property value ratio (LVR), which means you may need a larger deposit.
Checking your credit history is a good step for anyone applying for a home loan. If you're self-employed, it's definitely worth taking the time to make sure your credit history doesn't include any defaults or errors these can hold up your loan application if they are not rectified in advance.Taking the time to work out exactly how much you'd like to borrow is also a good idea. That way, you can hit the ground running when you meet with lenders or your mortgage broker.
5. Think outside the square
While it's a little more complicated for self-employed borrowers, getting a home loan can be easier than you'd imagined with a mortgage broker in your corner. Speak to your broker to find out how a broker could help you secure a home loan.Source: PLAN Australia: Your Loan Hub