Self-Employed loan options
If you are self-employed, you may already be aware of the challenges some people face in applying for a home loan. Whether you are newly self-employed, or you have run your own business for many years, the documentation you require to apply for a home loan differs greatly to a regular home loan. There are a number of home loan options available to you and I would welcome the opportunity to meet with you to talk about your self-employed situation; the home loan options on the market that may suit your business structure and your financing needs, and how to prepare your application to achieve a home loan approval.
Full Doc Loan
Generally speaking, most lenders require two years of financials and tax returns records for self-employed applicants. This can vary depending on the structure of your business which ranges from Sole Trader, to a Partnership or Company structure. If you do not have two years of financial return records, they may limit your lending options, however this in itself is not a show-stopper. Quarterly Business Activity Statements (BAS) can sometimes be used to mitigate gaps in the available returns. Often success in this area will depend on the way that the information is presented.
Lo Doc Loan
A Lo Doc (or Low Documentation) Home Loan can be approved with less strenuous income verification requirements. Requirements here vary between lenders but at a bare minimum you will be required to sign some form of income declaration that the bank will then accept as proof of income and you will generally be required to have an ABN & be registered for GST.
No Doc Loan
Most mainstream lenders do not operate in this space anymore due to responsible lending practices and disclosure requirements. It is still possible to get a No Doc loan through a private funder, however the terms and conditions for this type of loan structure will not come cheap.
A variation in the profit between years can also be treated very differently between lenders. Some will average profit amounts, some will use the lower amount while others will use the lower amount plus 20% of that amount. Other variables that impact self-employed lending relate to “Add Backs”. These are essentially expenses that you have incurred that have reduced your taxable income, that may not necessarily be of a cash nature or may not be an ongoing commitment. Common items here include depreciation, additional superannuation contributions and interest expenses on business loans.