Being self-employed brings greater control and freedom in your life (and often money!) but it is often perceived as making it more difficult to obtain a home loan. Whilst the requirements of lenders are different for self-employed people, the process is exactly the same.
Most lenders require you to have been operating your business for at least 2 years. If you were previously employed in the same field then some lenders will look at this favourably and may accept less than 2 years trading.
Financial statements, business tax returns and personal tax returns are all used to verify your income. Depending on the structure of your business (e.g. self-employed, partnership, company) other documentation may be required.
The majority of lenders will permit some items from the Profit & Loss Statement to be ‘added-back’ which effectively increases the income available to service the loan. This can include depreciation, interest expenses, one-off extraordinary expenses and voluntary superannuation contributions.
Your UFSWA Mortgage Broker will calculate any applicable ‘add-backs’ when assessing your financial position.
Some self-employed clients have difficulty in meeting the standard documentary requirements of lenders. “Low doc” or “Alternative doc” alternatives exist with a number of lenders, which rely on other sources of income verification, including BAS statements, trading account statements, interim financials and letters from your accountant. As these types of loans represent a higher risk to the lender (due to the alternative form of income verification) the maximum loan-to-value ratio (LVR – the loan amount as a percentage of the security value) usually permitted is 80%. Lenders Mortgage Insurance is usually payable for Low Doc loans over 60% LVR. Call our Mortgage Broker on (08) 6252 7600 today or click here to request an appointment.
Disclaimer: Loans are approved or declined on their merits by the specific lender and a loan approval is not guaranteed. We believe the information on this page to be correct. However we can give no warranty to this effect and expressly disclaim any liability for loss or damage by any person acting upon the information provided herein.