Firstly, owning your own business you’ll know all about the challenges of admin – keeping your accounts, finances and income flow all on track. It’s not easy. The last thing you need is a ‘no’ on your home loan application because of the paperwork.
But here’s some good news if you’re self-employed and want a home loan.
There are alternatives.
Here are four steps if you are self-employed and want a home loan.
1. Sort out the paperwork you do have
When mortgage lenders are looking at a home loan application, they are usually looking for a regular level of income that shows them you’re able to make the proposed repayments. Therefore, start by preparing paperwork that proves you’ve been self-employed for an ongoing amount of time and that you do earn a regular amount each month. Being able to demonstrate these things to them will help build your case.
An Alt Doc Loan might help.
Given that it is sometimes a bit of a challenge to provide all the paperwork you need to document your income, some lenders have worked out a different process for it – it’s called alternative documentation (Alt Doc for short).
This is specially designed to meet the needs of those who are self-employed and want a home loan. Business owners who can’t provide the income documentation required by traditional lenders and mortgage insurers but can still provide valid information, can still get a loan, just with different types of paperwork.
As a broker we have access to many major non-bank lenders who consider Alt Doc applications.
Some of the things they look for are:
- At least 6 months ABN registered
- GST registered for at least 6 months
- (BAS) Business Activity Statements, and/or
- Business Bank Account Statements, and/or
- An Accountants Letter.
2. Be smart with your cash flow
Keep things on track
Using a financial plan to manage cash flow can be really good for people who are self-employed. Paying off any outstanding debts such as credit cards or personal loans will positively impact your cash flow, and potentially your credit score, which may also mean you’ll qualify for a higher loan amount with some lenders.
3. Be up front with your broker
Trust their experience
Importantly, from the get-go, it’s really important to be upfront about what’s been going on in your business. This is essential when there are any large variations up or down in the taxable income. Alternative lenders have experience with a range of borrowers who are self-employed and are familiar with evaluating the particular cash flows of small businesses.
4. Tackle the taxable-income dilemma
Get good help
One of the biggest challenges self-employed people and small business owners face is their taxable income. The thing to think about when you address this question for your business is how your financial statements today will impact your borrowing options in the future. Talking to a financial adviser and tax professional about your goals (like buying a house) when you work out your taxable income is an important step.
These are some ideas to help your loan application planning. There are many options for self-employed people who are looking to get a home loan.
If you’d like more information talk to us today about how we are able to put you with the right lender for YOUR situation to avoid a ‘no’ to your loan application.
Disclaimer: This article is factual information only. It is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. If you need financial or tax advice please consult a licensed financial or tax adviser. The information in the article is reliable at the time of distribution, but may not be complete or accurate in the future. For information about a loan that may be suitable for you, call us on 0409 200 059.
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