Self Employed First Time Home Buyer - banner

Self Employed First Time Home Buyer - banner

Self-Employed First-Time Home Buyer: Step-by-Step Guide

Are you a self employed first time home buyer? Are you feeling overwhelmed by some of the challenges that come with applying for a mortgage when you’re self-employed? If so, you’re certainly not alone. What you need is some expert guidance, delivered in a way that is easy to understand. What you need is a ‘Self-Employed and First-Time Home Buyers Guide’.

As a self employed first home buyer, you will encounter some unique issues. You’ll be asked to provide proof of a stable income; you may face stricter lending criteria and there may seem to be an endless amount of paperwork involved. Fortunately, it’s not all bad news for first home buyers who are also self-employed. 

Why You Need a Self Employed First Time Home Buyer Guide 

There has been a steady increase in the number of Australians who work for themselves. Self-employment now accounts for 16.6% of the Australian workforce. Of those who are self-employed, the Australian Bureau of Statistics (ABS) classifies 1.1 million as independent contractors (accounting for 8% of the workforce). With the rise in self-employment, there has been a natural and simultaneous upsurge in the number of first-time home buyers who work for themselves.  

Many self-employed contractors or small business owners experience a certain amount of financial variability. Some months you might receive payment for multiple completed jobs and be flush with cash. During other months, you may be mid-way through a project and waiting until it’s completed before issuing an invoice. 

This irregularity can make it difficult to prove to a lender that you’ll be able to service a monthly mortgage repayment. Additionally, it can be hard for self-employed borrowers to meet the standard documentation requirements of some lenders.

This is why it’s so important to consult with a reputable ‘Self-Employed First-Time Home Buyers Guide’. With the right advice, a self-employed first home buyer can get the necessary paperwork together, and follow practical steps to improve their application.

Self Employed First Time Home Buyer Preparation Guide

self employed first time home buyer getting tips from mortgage broker on phone

If you’re self-employed and planning to buy your first home, then there are some practical steps you can take now to get prepared. These include:

1. Try to improve your credit score

This is a good tip for anyone who wants to apply for a home loan, but it is especially important for a self employed first time home buyer (since you’ll likely face stricter lending criteria). Start by checking your credit report to make sure it doesn’t include any errors. 

Once you’re sure everything is in order, try to boost your credit score by paying all your bills on time and reducing debt (things like personal loans and credit cards). It’s also important to hold off on applying for any new forms of credit, as this will have a short-term negative impact on your credit score.

2. Get your paperwork together

Start compiling all of the paperwork you’ll need to apply for a home loan. This may include up-to-date tax returns, business activity statements (BAS), profit and loss statements and copies of your bank statements for the past few months. It can be a good idea to speak with your accountant at this point to ensure everything is accurate and in order. 

The lender will want to see some evidence of an overall stable income, even if this may fluctuate from month to month. If you have evidence of a steady income (in the form of an ongoing contract with a customer), this can also be used to support your application.

3. Put together (and follow!) a realistic budget

Start by analysing your cash flow throughout the past year or two to identify any patterns. Do you see your income vary based on season or at certain points throughout the financial year? Once you’ve identified these patterns, put together a conservative budget that you can easily manage during these periods of lower income. 

3. It’s also a good idea to build up an emergency savings fund to cover unexpected breaks in your income. This demonstrates to a lender that you’re living within your means and planning for periodic income downturns.

4. Talk to a mortgage broker

It’s a good idea to consult with a mortgage broker, even if you’re not yet ready to apply for a home loan. An experienced broker can be your ultimate self-employed and first-time home buyers guide. They’ll be able to assess your current financial situation and provide expert advice on any other practical steps you can take to get ready to apply for a home loan.

Mortgage Brokers: Your Ultimate Guide for Self Employed Home Loans

A self-employed first home buyer can have a positive experience obtaining a mortgage. The key is to be diligent and proactive throughout your home buying journey. Implementing the suggestions in this ‘Self-Employed First-Time Home Buyers Guide’ is a great first step. But to really take your home buying plans to the next level, you need to talk to an experienced broker.

At Professional Lending Solutions, we’re extremely proud of our reputation as brokers who specialise in helping self-employed first-time borrowers. If you’re ready to get started with buying your first home, or even if you’re just after some free and friendly advice, contact our office today.