When applying for a home loan as a self-employed borrower for the first time, you may be surprised at how different it is compared to if you just had PAYG income. With plenty of myths to confuse you, how can you know what is fact or fiction?
Listed below are our top self-employed home loan myths that we've debunked.
I have to have a “low-doc” home loan
Some self-employed borrowers assume that their only option is a specialized loan that may come with a higher interest rate and alternative documentation requirements. However, depending on your circumstances you might well qualify for a mainstream loan. To verify your income, most lenders will ask you to provide the most recent two years lodged tax returns and financial statements. If you have an established business with solid consistent income, these will be sufficient to qualify you for a standard loan. Keeping up to date with lodging your tax returns is definitely going to put you in the driver’s seat with home loans.
I need lodged tax returns to apply for a home loan
Ideally you will have your most recent two years tax returns lodged and these show solid consistent income. Self-employed borrowers can get behind with tax returns and sometimes haven’t been in business long enough to have two years’ worth. Lodged tax returns also may not reflect your current profitability as they are historical and market conditions might have improved.
If your situation qualifies you for a loan that can accept supplying documents other than tax returns, then the following could be used to verify how much you earn: an accountant's declaration, BAS statement and/or business bank statements. In this case you would do a declaration about how much you earn in a year and use these other documents to back this up.
I can't apply because I've only been trading for a short time
Believe it or not you could still qualify for a home loan if you have traded for as little as 6 months. For example, if you purchased an established business or have moved from PAYG to contracting, then your cash flow and profitability may be already at a level where you can borrow. Alternative documents like those above can be used to back up the level of income that you declare in your application. Rather than assuming that you have no options it is worth exploring your options.
At State Custodians, we understand self-employed lending. Our Lending Specialists are here to find solutions and can advise you on own in-house self-employed home loans as well as from a broad range of lenders. We are online so no need to wait for appointments. You can ask questions and chat with us via phone, email or live chat at a time that suits you. Check out the self-employed lending page on our website or give us a call on 13 72 62.