Self-employed people often ask us how they can get finance approval. While they are living the dream of owning their own business, it can feel complicated when it comes to getting finance. They don’t have a simple salary position where they can download their last two payslips for “regular” income proof. The good news is that with an experienced financial broker, self-employed borrowers can definitely get finance! In this article, we’ll look at low doc loans and how they can help you if you are self-employed.
What is a low doc loan?
First thing’s first, what does a low doc loan mean? Low doc loans are available to people who cannot provide the typical income proof like payslips from an employer. It can be a little confusing as the phrase “low doc” doesn’t always mean you will provide any less evidence of your income as part of your home loan application. It refers to providing different types of evidence to prove your income so a lender can assess your borrowing power.
Not every lender in the market offers low doc loans to help self-employed people secure finance. The bank you do business with day to day might not be your best option for home loan finance – but they won’t tell you that! This is where a professional mortgage broker can help match you with the right lender for your personal circumstances.
How self-employed can get finance?
Getting your financial records in order and having them up to date is crucial for getting a low doc home loan. Lenders want to be able to see your financial records so they can assess your income and expenses to determine how much they will let you borrow for your mortgage.
Lenders will usually want to see 1-2 years worth of personal and business tax returns and income tax assessments for your low doc loan application. It is your declared taxable income that matters here, not your gross turnover in your business.
What if my financial records are not up to date?
If your financials aren’t quite up to date, you may still be able to get a low doc loan with the help of an expert mortgage broker who has a panel of lenders available for you. You can do a thing called self-certification with some lenders. This means you self-certify that your income is adequate to meet your projected home loan repayments as part of your mortgage application.
Exactly what you will be asked to provide for your low doc loan will vary between lenders. As a general guide, you may be asked to provide evidence of the following:
- Bank account statements
- Recent Business Activity Statements (BAS)
- Evidence you have been employed in the same industry for at least 1 year
- Your Australian Business Number (ABN)
Other finance options available for self-employed
If for some reason, a low doc loan is not suitable for you, a non-conforming home loan could also be an option. These home loans do attract higher interest rates than your regular home loan, however, they can be used as a temporary option to get yourself into the property market. Once you have proved you can manage your repayments and you have a solid record with the lender, a mortgage broker can help you negotiate a lower interest rate with the same lender or even refinance to a new lender with a better interest rate.
There are quite a few options available to self-employed home buyers but it can feel difficult to find the right answers online for your personal needs. You find out how we can help you get the finance you need to buy your home, get in touch today on 0421 934 033 or 07 5597 6049.