How to buy a home when you are self-employed, but you are not qualified under standard bank policy?
Self-employed borrowers often find themselves against some challenge of not being able to present the last two years financial statement and tax returns to support their mortgage application due to their company ABN is less than two years. However, this won’t be able to stop you from buying your dream home.
Some lenders in the market still offering low-docs loans for self-employed borrowers who won't be able to show the last two years company financial statement and company ABN is less than two years. This mean rather than the usual full standard documentation, you prove your ability to service a loan using bank statements, BAS and declaration from your accountant.
Of course, same as any mortgage application, you still need to show your lender that your income after all expenses still able to service the loan.
Here are some quick tips that you can do to help your application success.
Reduce debt – Pay down any unsecured debt such as credit card and personal loan. Once the unsecured debt has paid off, you can either reduce the credit limit to the minimum amount, or you can cancel the credit facilities.
Speak to a finance broker about how to structure of your business, and your taxable income will impact your maximum borrowing capacity.
Always pay your tax and your tax assessment on time.
Saving a deposit is essential and it also able to show the lender that you can have a surplus to pay the mortgage.
Speak to finance broker instead of walk into the bank as most of the finance broker able to access to specialist lenders that able to assess the application that is outside the standard bank policy. Such as most big bank will not accept self-employed application with ABN of less than two years.
Low-doc loans do differ from standard loans that offer by the bank in specific ways apart from the application process. Lenders offset the extra risk they are taking by lending to a self-employed borrower or contractor by
Charging a slightly one to two per cent higher interest rates compare to regular bank
Lending no more than 80% LVR of the property value.
The lender also requires the borrower to pay the risk fee (lender mortgage insurance) to protect the lender in case the borrower cannot repay the loan.
If you are self-employed and you think you are not able to fit the standard bank policy, please don’t let to stop you from buying your dream home. Talk to Kevin Poh on 0415 820 016. He will able to help you with your low-doc loan application.