Self Employed Tips For Getting A Home Loan

Tips for Getting a Home Loan as a Small Business Owner

Starting a business from home is a great way to save on overhead costs and get everything up and running quickly. However, there may come a time when your business outgrows the available space in your home. When this happens, it’s time to move!

Getting a home loan as a business owner isn’t as difficult as you may think. While it’s true that lenders are hesitant about loaning money to self-employed individuals, there are several steps you can take to settle their concerns and reduce the risks involved in lending to you. As long as you maintain accurate and organized financial records, you shouldn’t have any problems.

Here are some tips from Master Mortgage Broker Sydney to help you get your home loan approved so you can keep growing your business!

Make a Bigger Down Payment

One great way to increase your chances of being approved for a mortgage is to make a larger down payment.

Nolo explains that if you can make a down payment of at least 20%, you will be eligible for the most favorable loan rates and you might not have to pay for mortgage insurance.

Keep in mind that making a larger down payment might mean lowering your home-buying budget. Look for ways to save money on your home purchase so you can afford to make a hefty down payment and reduce your loan rate.

For example, you could buy a home listed “as is” if you’re willing to take on a few maintenance projects.

As long as you do your homework and keep an eye out for red flags, this could help you get a great price on a home that just needs a little TLC. Redfin suggests talking to a lawyer, hiring a home inspector, and reviewing property records before purchasing an “as is” property.

Be Prepared for the Future

Inflation is another reason to buy below your budget. Interest rates are likely to rise as things open up again and the economy recovers post-pandemic, which means your mortgage rate could jump unexpectedly.

Keep this in mind during your housing hunt. When it comes to securing a mortgage, consider pursuing a fixed-rate mortgage so you can avoid the threat of rate hikes during a period of steep inflation. If you choose to go with a variable-rate mortgage, make sure your financials will be able to withstand an interest rate increase in the future.

Prepare the Proper Documents

Getting a mortgage as a self-employed individual is all about reducing the perceived risk of lending to you. You must provide sufficient evidence that you can cover your mortgage payments every month. This can be tough to prove when your business income varies from month to month, which is why lenders require additional documents from business owners including profit and loss statements, balance sheets, and tax returns.

Consider Different Loan Options

If you can’t provide all of the required documents to prove your income, you may want to consider alternative “low doc” loans. A low doc loan caters to business owners who cannot verify their income through standard documentation and is ideal for self-employed individuals without sufficient tax or financial records. If you just started your business recently, a low doc loan might be your best bet!

Even with a low doc loan, you will still need to provide certain documents to verify your income. Typically, this involves a credit history report, a declaration of income signed by you, and an Australian business number that has been registered for at least a year. Keep in mind that some lenders may cap your loan amount to 60% of the home value when you opt for a low doc loan, so you may need to put more money aside for a down payment.

Running a home business can be incredibly fulfilling. However, it can become a headache when your business starts to take over your home. Applying for a mortgage, house hunting, and navigating a move takes work, but it will be worth it when you finally have the space you need!

Ready to move?

Master Mortgage Broker Sydney can help you get the self-employment home loan you need. Contact us today! Call 02-8861-1689.



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