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In 2021, there were 2.2 million self employed people in Australia. You may have been one of them. If so, you may qualify for a self-employed home loan soon. 

Or you may not. Getting home loans can be incredibly difficult for those who are self-employed. Luckily, there are plenty of types of loans that you can use 

Read on to learn about what it takes to get a self-employed home loan. 

Are You Self-Employed? 

The term “self-employed” has many definitions. People who define themselves as self-employed are usually one or more of the following types of workers. 

• Business owners 
• Freelance workers 
• Contract workers 
• Seasonal workers 
• Gig workers 
• Side job workers 

Formally, experts define self-employed people as people who don’t take on work provided to them by an employer. Instead, they earn income through work that they find for themselves. 

If You’re Not Sure 

These days, it can be difficult to know if the work a person is performing is self-employed work. Many driving and delivery apps say that their workers are independent contractors. This is another way to say self-employed. 

If you don’t officially operate a business, you may need to double-check your work contract. You should find out if your client/employer defines you as an employee or independent contractor there. 

What Can Decrease Your Chances 

Lenders should hold regular employees to the same standards as the self-employed. Both should meet the same income, credit, and asset standards. It’s just harder for the self-employed to prove that their source of income will be enough to pay off a loan. 

Stable, Sufficient, and Ongoing

A self-employed person’s income record may be spotty. This is especially the case with contract work as some self-employed people can go months without work. In addition, many types of self-employment don’t pay as much as standard types of employment. 

These features will not look impressive to lenders when self-employed people apply for home loans. They will only want to take on clients that have stable, sufficient, and ongoing forms of income. That is, their client has to make enough at a constant rate into the foreseeable future. 

What Can Increase Your Chances 

Luckily, there are plenty of methods you can use to get around the disadvantages of being a self-employed loan candidate. Before you go for some of the best self-employed home loans, try improving your odds of approval with the following methods. 

Use Other Assets 

Lenders may consider some self-employed clients despite their low and unstable income. These clients just have to have a certain amount of other assets. This can include additional savings and other forms of property. 

If lenders see that a self-employed person has enough assets to pay off a loan, they may approve the loan. 

Pay Off Debt 

Lenders prefer clients that have an optimal debt-to-income (DTI) ratio. This usually means that their clients should have the smallest amount of debt compared to the amount that they make. 

If you completely pay off your debt, lenders will find you highly attractive. But this isn’t completely necessary. You still have a good chance of getting a home loan if you at least pay off a good chunk of your debt. 

Max Out Credit Score 

The higher your credit score, the more likely you are to get a home loan. So do what you can to raise your credit score as high as it can go. 

You may think doing this will be difficult, but this is not necessarily the case. There are plenty of simple steps you can take to max out your credit score. Asking for a higher credit limit is one of them. 

Offer a Large Down Payment 

Lenders will think you’re less of a risk when you offer a large amount of money upfront. This isn’t because they want money in their hands right away. They know that you’re less likely to walk away from a loan if you’ve already put a lot of money down. 

Get a Self Employment Track Record 

Self-employed individuals often have spotty work track records. Try holding a self-employed position for at least two years. This stability should prove that you know how to find success in a self-employed environment. 

The Best Loans For the Self Employed 

Of course, making yourself the best candidate possible may not be enough. You may want to adjust the type of home loan that you’ll end up getting. 

Joint Mortgage 

Do you have a friend, spouse, or significant other that has good assets, a high credit score, and so on? If so, consider getting a joint mortgage with them. A financially attractive co-borrower can assure your lender that there’s a steady income that will eventually pay back the loan. 

Enlist a Cosigner 

You may be able to get a friend or family member to be a co-signer on your mortgage loan. If you can, that person will be responsible for the home loan if you default. This way, the lender will take on less risk. 

Still, don’t expect any of your friends or family members to do this readily. It’s a lot to ask of them. 

Bank Statement 

Lenders may allow you to apply for a home loan with 12 to 24 months of bank statements rather than your tax returns. This may be the best choice if you have sizable financial assets but your employment record is spotty. 

Get a Self Employed Home Loan in Sydney

So, in summary, it’s not impossible to get a self-employed home loan. You just have to take certain steps so that you become as attractive a candidate as possible. Keep going over the tricks above and try them out when you’re ready to get a home loan. 

Also, if you’re a self-employed individual in Sydney trying to get a home loan, come see us. Our 20 years of experience in low-doc loans are sure to be a godsend if you’ve been rejected by other lenders. Get in touch with us via one of the methods on this page.