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Self-employed workers. They have the freedom to be their own boss, but one of the drawbacks can be more complicated tax returns. There are over two million Australians who consider themselves self-employed. Unfortunately, not all of them can qualify for a traditional home loan. 

So what home loans for self-employed people are available? Allow us to introduce you to low doc loans. 

How do you apply for a loan? What do you have to do? What are the chances that you get approved for going this route? 

This is your guide. 

What Are Low Doc Loans? 

Before we can go into the process of getting one of these, you need to understand exactly what this is. Essentially, low doc loans are a friendlier option than full doc loans for self-employed workers. 

Why is this? The main reason is that there are fewer tax return requirements here. Basically, you do not have to show your tax returns on this type of loan the way that you would a full doc loan. 

On a full doc loan, that would require you to have two years of tax returns ready for a lender. Not all self-employed people have that, particularly people that are just getting started with their business. 

Essentially, this gives people who cannot meet those requirements a path to still get a home loan. 

Paperwork Needed

Now that you have an understanding of what this type of insurance is, let’s get into the paperwork that you will need. Here are a few things that you are going to need to present before you get approved for this loan. 

Recent Business Activity Statements 

This should be obvious, but a lender needs to get a better idea of what your business is and how it is performing. This helps them make sure that you are asking for money for legitimate reasons. 

Also, this can be a good criterion for a lender to determine if a borrower can pay the loan back or not. These statements can tell a lender how much money a business needs to operate and if it is making enough of a profit for you to pay the loan back without problems. 

ABN 

Next, you are going to need to present your ABN. For those that do not know, this is an 11-digit code that identifies your business for tax purposes when you register it in Australia.

If you do not have this, you at least need to present your business’ name. Sometimes, you may need both. 

Bank Statements 

Similar to the business statements above, this allows a lender to see if you have enough money to keep up with the payments. Also, it can show them if you are going in over your head with this home loan. 

GST 

You need to provide these registration details as proof that you are a legitimate tax-paying citizen in Australia. It can also give a lender an idea of if you owe any back taxes. 

Letter From Accountant 

This serves as a reference to back up everything that you are claiming to a lender. It holds weight because this is a professional who deals with these types of numbers and finances every day. 

It can also show a lender that you had your financial situation checked out by another professional before you even started this process. 

Income Declaration Form 

Last, you need this form as self-proof that you have the income that you claim that you do to back up this type of purchase. Depending on your circumstances, income level can be a big measurement as to if you can afford to pay back a loan or not. 

Things to Get Approved

There are a few big things that you can do to get approved for this type of loan. The first is to clean up your credit report. 

If you come into this with bad credit, you are going to have a hard time getting a loan. It can show a lender that you are not good at paying people back on time. 

Next, you want to have more assets than income. Generally, the recommended amount is 2:1 to have a good chance of getting approved. Essentially, whatever your income is, it is best to try to at least double that in assets. 

Another thing to keep in mind is to make sure that you have enough money for a down payment. The reason why this is important is that it can save you payments on lenders’ mortgage insurance later. 

Typically, if you cannot come up with at least a 20% down payment on your home, then you will be required to take lenders’ mortgage insurance. This ensures a lender that if you cannot pay the whole mortgage back for any reason, they will be covered for the losses they would have on your missed payments. 

So, make sure you save up enough before you do this. 

Find a Lender for Loans for Self-Employed

The last thing that you need to do is find a reputable lender that can help you with low doc loans for self-employed people. Do not be afraid to shop around and do your research on this, because it can make a difference. 

Just make sure that you have the right paperwork, clean up your credit, build assets, and build savings before approaching a lender. 

Do you want to get a low doc loan? Message us today to get started on this.