Latest News

Our shifting workforce has seen an influx of freelance workers pouring into the gig economy. Of the millions of workers in Australia today, roughly 2 million considered themselves self-employed in 2021.

If you count yourself among these numbers, you likely know some of the common hurdles that come with being self-employed. A couple of which are documentation and paperwork. If you’re starting the home-buying process, we’ve got some helpful self-employed home loan tips and tricks you can follow.

In this article, we’ll provide you with all the need-to-know items during the home-buying process. Keep reading to learn more about self-employed home loans and the top tips to follow when it comes to getting approved!

1. Gather Documentation Early

The requirements for a mortgage application from someone self-employed are no different than someone with a traditional job. The biggest difference between the two is how much documentation you’ll need before getting approval.

To that end, the first tip we have for you is to get your documentation in order well before you begin the process of applying for a home loan. Prior to applying, you’ll want to gather at least two years worth of income verification. This will include documents such as:

• Income statements
• Balance sheets
• Business bank statements
• Personal bank statements
• Tax returns
• Business license
• Letter of verification from your accountant

Because income fluctuates so frequently as a self-employed person, having multiple years’ worth of income verification will help the bank verify your ability to make your mortgage payment every month.

2. Optimize Your Credit Score

It’s no secret that the higher your credit score, the more likely a bank is to approve you for a loan. A high credit score indicates to the bank that you are a trustworthy borrower, willing and ready to pay your loans in a reliable manner.

You can help boost your credit score a number of ways, including:

• Don’t open new lines of credit right before applying
• Don’t miss any of your regular monthly payments
• Bring any past-due bills current
• Try to pay down any revolving balances

Each lender will differ on what an optimum score will be. However, optimizing your credit score before going into the self-employed mortgage process is one tip we recommend you follow to help your chances of getting approved. Not to mention, a higher credit score usually equates to better interest rates.

3. Prove Work History

Owning your own business as a freelancer means you don’t have anyone controlling your work output or income. It’s up to you to track and document everything you do at work. To that end, you want to signal to your bank that you have a good amount of credible work history built up before applying for a home loan.

Try to have at least two years of work and income history before applying for a home loan. This gives the bank enough proof that you can consistently and reliably work in the self-employment world.

4. Boost the Down Payment Amount

Putting in more cash upfront is an excellent way to showcase to lenders that you’ve thought seriously about the home-owning process. A large down payment offer signals to a bank that you have the capability to save money, demonstrating to them you’re a serious buyer.

With the average price of residential homes in Australia hovering around $880,000.00, saving even 5% for a down payment seems like a big feat. However, the higher you’re able to put down for a down payment, the higher your chances you have of gaining approval for a loan. Aim for higher than a 20% down payment if you can, and you’ll be on your way to signing those papers.

5. Bolster Your Savings Account

Our final tip when figuring out how to get a mortgage when you are self-employed? Bolstering your emergency fund is an excellent way for lenders to see that you have cash reserves to utilize for any potential slowdowns in business in the future.

A large savings account will also help you take care of typical home ownership checklist items like property taxes and any repairs that might need fixing. You don’t want to worry about having to make a mortgage payment on top of unforeseen roof repairs or a water heater replacement the first month in your new home.

General Knowledge Items

If keeping a large amount in savings isn’t feasible for you right now, or you’ve only got enough for an average down payment amount, don’t worry. There are a few things you can keep in mind when it comes to self-employed home loan requirements.

In general, it’s important to know that banks simply want to confirm your trustworthiness as a buyer. They will be looking to confirm details such as:

• If your business is financially sound
• Length of time you’ve been self-employed
• Your business isn’t overextended
• Personal income history

Most importantly, lenders want to know that even if you’re a successful freelancer, you won’t have any trouble paying your monthly mortgage payment. Using these steps above can help you get approved and into your home with little fuss.

Want to Know More About Self-Employed Home Loans?

We hope these home loan tips for the self-employed have been helpful! Each person’s financial situation will vary, but be sure to keep these tips in mind when starting the process for a smooth approval.

If you’re hoping to learn more about self-employed home loans at Low Doc Loans, we’re here to help! We offer competitive rates and various repayment options for self-employed workers without traditional financial documentation.

Our team of mortgage brokers specialize in self-employed home loans. Give us a call today or visit our contact page for more information.