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How To Buy A Home When You’re Self-Employed

Self-employed borrowers can have it a little tougher than those working for an employer when applying for a home loan. Where longterm PAYG employees can simply supply their last two payslips for income verification, these of us who are self employed need to go back a little farther. But this doesn't mean it needs to be put in the too hard basket.

Many lenders do offer loans for self-employed borrowers, and simply just require some additional information to back up their declared incomes. the last two years tax returns is the ideal situation, but for those only in business for 12-18 months, as long as the business is profitable there are lenders who are open to this kind of scenario.

Of course, as with any mortgage application, you must still prove that your income outstrips your spending and you can service the loan. Getting this right is more than presenting a lender with a few quick sums on the back of a napkin, it can at times take a solid six to 12 months of preparation.

Here are some quick tips:

1. Reduce debt: Try to pay down credit cards and personal loans, and be sure to lower the credit limits as you pay them down. Lenders assess the total credit available to you as a potential debt level, not just the amount you owe;

2. Cancel credit cards that you don’t need (this will affect credit scoring). If you have more than one credit card, think about what you really need them for and could you structure your spending to live just off one.

3. Do your taxes - I agree that nobody really likes paying tax, but in order to achieve the loan you want, a lender will want to see that the business is profitable. By keeping your tax returns up to date, you can show the lender that all is in order and ultimately the business is in a good position and you can afford the loan.

4. Save! - Having a deposit is obviously important, but showing how you achieved that deposit by living within your means is equally as important. A regular savings pattern enables lenders to see that you can save and be diligent with your income and expenses. It makes them feel safe knowing that you are able to manage your expenses when it's time to repay the loan.

5. Speak to an accredited finance broker about how the structure of your business and your taxable income will impact your ability to borrow for a home. We can sit down and go through all your income and expenses, and then lay out a plan on how to manage these in order to get you in the right position to borrow what you need. If you need help, reach out us at Sky Blue Finance

If you're self employed and would like some insight into what hurdles there may be in obtaining finance and how to best overcome these, contact us at Sky Blue Finance and we'll help you find your way.

Simply click here and we'll get you on your way... Sky Blue Finance

An accredited finance broker is much more than just your average mortgage broker.

*LVR is the percentage of loan versus valuation of property.

**LMI protects the lender against potential loss.