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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 long-term PAYG employees can simply supply their last two payslips for income verification, those of us who are self-employed need to go back a little further. But this doesn't mean it needs to be put in the too-hard basket.

Many lenders do offer loans for self-employed borrowers – they simply require some additional information to back up your declared income. The last two years' tax returns are ideal. 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 6 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 whether you can structure your spending to require just one card.

3. Do your taxes. Sure, 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 pattern of savings 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 mortgage 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 with you and go through all your income and expenses, then lay out a plan on how to manage these in order to get you in a good position to borrow what you need. 

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 and we'll help you find your way.

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

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

📞 Call Peter on 0414 602 491
📧 Email Peter at info@skybluefinance.com.au

Note: The above information is general in nature and does not constitute personal financial advice. It has been prepared without taking your unique objectives, financial situation or needs into account. You should seek your own independent advice as to whether or not this information is appropriate for you.