How to get a mortgage loan when you are self-employed?

You may have noticed that most self-employed people have to fight a lot more with lenders/credit providers when applying for a home loan. But that doesn’t mean all self-employed borrowers have to struggle to get financing. It simply means that you may need the services of an expert financial broker by your side, who is a specialist in making loans for the self-employed. Choose a financial broker who is willing to work on your behalf with lenders/credit providers and help you get a loan package. Not to mention, he/she must also get the right home loan that suits their needs and budget.

Why do you need expert advice?

Before you think that it is impossible for self-employed borrowers to get a home loan, you should sit down with an expert and professionally qualified finance broker, who:

>> Establish what level of taxable income you need to apply for a loan

>> Establish your borrowing power (i.e. how much you can borrow), and

>> Determine your eligibility for a loan

When evaluating your eligibility for a mortgage loan, the financial agent should be able to see if your business maintains an adequate level of income to meet the minimum “service” requirements.

Income Verification Requirements for Self-Employed Persons

To confirm your income and qualify for self-employed home loans, lenders/credit providers will require you to:

>> Your personal income tax returns for the last two years

>> Your business income tax returns for the last two years, and

>> Your financial statements for the last two years (itemized profit and loss accounts and balance sheet)

What if I have been self-employed for less than a year?

Well, it’s not impossible to get a home loan with your employment status; it simply means that the finance broker will have to work hard to ensure his eligibility for the loan. For example, he is now self-employed as a contract carpenter. But he was employed in the same industry (ie line of work) and worked for someone else for five years before becoming a subcontractor. He can still be considered for a home loan. Because you’re still working in the same industry and you’re doing the same job. The only thing that has changed is the way you are paid.

Choosing the “right” home loan

There is a wide range of mortgage loans suitable for you as a self-employed borrower. So whether you’re looking for a traditional or low documentation loan. Here is a list of home loans that are right for you:

interest only loan – This loan is perfect for investors who want to maximize the cash flow of their property.

Standard Variable Rate Loan – This is the most popular type of loan as it offers you many useful features and flexibility. You can link your variable-rate home loan to a clearing account, which helps reduce your overall interest.

Standard Fixed Rate Loan – This loan is popular with investors as it offers you the security of a fixed rate. You’ll have peace of mind knowing your payments won’t change over the term of the loan you’ve selected and they’ll also help you when budgeting.

Basic Variable Rate Loan – This loan is ideal if you are looking to make minimum payments and require less flexibility than a standard variable rate home loan.

Credit line – This loan allows you to use the capital of your property and you will only pay interest on the money that you actually use.

Low Doc Loan – This loan, also called a low documentation loan, is ideal for borrowers who are self-employed and cannot provide evidence of income. A Low Doc home loan requires an “Accountant’s Statement” form/certificate or BAS statements from the last 12 months and an ATO registration reference number.

construction loan – This loan is a great option for investors who want to build. Construction loans typically carry interest only for the construction period. But, once the construction period is over, you can select between a variable rate, fixed rate or line of credit loan.

Buying a home at any stage of life can be an overwhelming process in and of itself. Not to mention having to navigate through the options and determine which mortgage suits your needs. All of this can be a challenging and time-consuming task, so having a financial broker on your side will save you a lot of time and heartache.