How to get a home loan when you're self-employed

How to get a home loan when you're self-employed
It can be challenging trying to get a home loan when you're self-employed - but it's not impossible. Find out how you can qualify for a home loan with your circumstances.
Find out if you qualify

If you work for yourself, or fall under the category of ‘self-employed’, applying for a home loan can be quite a challenge even if your income is regular. Unfortunately, many lenders perceive self-employed people as high-risk borrowers.

But this does not necessarily mean you cannot qualify for a home loan. It just means you might need to put a little bit more effort in to get your home loan approved. If you’re in this situation right now, where you're finding it difficult to qualify for a loan, here’s some tips and tricks to get your loan application approved.

Provide accurate documentation

As someone who is self-employed applying for a loan, your main goal is to prove your income to your lender. You can do this by providing your personal and business income tax returns for two years and also the  profit and loss statements of your business. Lenders want to see consistency in your income.

You can ask a professional such as an accountant or a broker to help you document your personal tax returns and financials. Also, make sure that your income tax returns are lodged with the Australian Taxation Office (ATO).  

Boost your deposit

This may be easier said than done, but a healthy amount of deposit can boost your chance of qualifying for a loan. It shows the lender that you’re a lower-risk borrower and that you’re financially disciplined. Generally, putting down 20% or more of the value of the property is ideal. This also gives you the benefit of not having to pay for expensive Lender’s Mortgage Insurance.

Prepare a list of your assets

Your lender will need to see proof of your deposit. So you will need to prepare a list of your assets. This could mean showing bank statements to confirm your savings or term deposits. At least six months of recent bank statements will be required. Other assets may include any investments like stocks and rental properties. Moreover, if you already have an existing property, you can use your equity when you apply for a loan.

Maintain a high credit score

Whether you’re self-employed or an employee, a high credit score will increase your chance of qualifying for a home loan. Remember, your lender will not just run a credit check on you, they will also inspect the credit history of your business, so make sure that your business’s credit score is healthy too.

If you find yourself with bad credit, you can still improve your credit score by sorting out any unpaid debts and making sure that you continue paying your debts on time. You can also check your credit score from your provider to make sure there are no mistakes.

Make sure you are well established

If you have only been self-employed for a few months it will make you a less attractive candidate for a loan. So make sure that you’ve been successfully self-employment for a couple of years. 

Bottom line

Looking to finance your house when you’re self-employed may take a little more work and preparation compared to being an employee. But getting your home loan approved is still possible as long as you have your financial documents in order to prove your income. 

Tags: home loans | self-employed home loans

Your goal is within reach
with our loan products

Related articles

Follow our handy home loan documentation checklist to speed up your loan application proce...

If you're thinking about taking the plunge into home ownership, here's what you need to kn...

Saving for a 20% house deposit is one of the biggest hurdles to getting into the property ...