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Home Loans For Self-employed
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An increasing number of self-employed Australians believe that being self-employed means that they cannot get a home loan. Added to this belief, is that traditional banking institutions are still apprehensive towards self-employed applicants, because of their irregular income.
If you are self-employed you may have realized on a number of occasions that you have to jump through a number of hoops just to get a home loan from the traditional banking institutions. So, don’t let the fact that you are self-employed get in the way of obtaining a suitable home loan that best meets your needs and circumstances.
When you read this article you will find that you can be self-employed and still get a home loan. However, you just have to work a little bit harder and pay close attention to some details (i.e. your proof of income).
When you are looking for a home loan there is much more to consider than just the interest rate. Here a list of useful “Tips” that may help you when you are looking to get a home loan and you are self-employed:
Tip # 1 – Speak to a Professional Qualified and Expert Finance/mortgage Broker
In order to fully grasp the whole home loan process as well as trying to understand the numerous documents and mortgage agreements that you may be inundated with you should consider:
• The possibility of wasting your valuable time by running around on your own trying to find the home loan that best meets your needs and circumstances; or
• The possibility of saving your valuable time by seeking the assistance and guidance of a professionally qualified and expert finance/mortgage broker who has full knowledge of how home loans for self-employed applicants work.
Tip # 2 – Establish your Borrowing Power
When assessing “how much you can borrow?” as a self-employed applicant, lenders/credit providers will look at your borrowing power so you can:
• Use this handy “Borrowing Power Calculator” to calculate for yourself “how much you can borrow?”, or
• Seek help from a professionally qualified finance/mortgage broker who will estimate the amount you can borrow while at the same time look at your current financial situation.
Tip# 3 – Determining your Serviceability
When assessing your eligibility for a home loan as a self-employed applicant, traditional banking institutions will look for consistency of income as they want to see that:
• You are a business owner or a partner;
• You maintain a steady income and that your level of income is suitable to meet their minimum servicing requirements; and
• Your business has been ticking along steadily and you have been trading in your current business for at least 24 months;
Tip # 4 – Verifying your Income
To confirm your income as a self-employed applicant, traditional banking institutions will require your, most recent two years Personal and Business Income Tax Returns. However, tax returns are just one example of how you can verify your income. There are alternative ways to show that you can afford a home loan as a self-employed applicant, for example:
• One way is via your Business Activity Statements (BAS). Your BAS shows the turnover of your business’ profit. Because, your BAS is completed either monthly or quarterly, it is considered to be an applicable source of income verification by other non-bank lenders/credit providers, as the BAS reflects the current status of your financial situation; or
• Another way your income can be verified is to have your accountant speak with a non-bank lender/credit provider so they can confirm with each other the state of your business’ financials.
Note: Tax returns are considered to be the most common and traditional form of income verification for self-employed applicants. You should, however, keep in mind that if you verify your income in an alternative way, some non-bank lenders/credit providers may charge a higher interest rate.
Tip #5 – Compare Home Loans
Take time and do some homework by comparing home loans being offered to self-employed applicants by different lenders/credit providers as it can be confusing to know:
• Should you get a variable rate or fixed rate home loan?
• Should you get a principal & interest rate or an interest-only rate home loan?
• What payment frequency you can consider (i.e. weekly, fortnightly or monthly)?
• Can you make additional repayments?
• Can you have a redraw facility?
• What fees and charges will you are charged on your home loan (e.g. application fees, ongoing fees and more)?
• If you decide to repay your home loan sooner, will you be charged an exit fee or early termination fee? and
• Will your lender/credit provider charge you a break fee for ending a fixed rate loan before the fixed rate expires? If yes, how much will you be charged?
Tip #6 – Other Factors to Consider
Traditional banking institutions may turn you away just because:
• Your employment status shows you as being self-employed;
• Being a self-employed applicant you lack a regular income;
• You may be unable to provide business financial statements to prove you have the ability to pay back the home loan; or
• You may be recovering from a bad credit history which can happen when you are self-employed (i.e. it may be that the bad credit history was as a result of mitigating circumstances beyond your control).
Note: Even if you have an impeccable credit file, a traditional banking institution can deny you a home loan, simply because you are self-employed and you have an unreliable income.
Seek Expert and Professional Advice
So, now you have read this article you should have a better understanding that it is not impossible to get a suitable home loan, even if you are self-employed. You just have to work a little harder and pay close attention to some details and you should consider seeking assistance and guidance from a professionally qualified finance broker or a mortgage broker.
http://www.singhfinance.com.au is a reputed Australian finance brokerage firm that employs a team of expert and professionally qualified finance brokers who are home loan experts and are willing to guide you through the home loan process requirements. They will also obtain a pre-approved home loan or a car and truck loan for you. They will even help you find suitable insurance for your home or motor vehicle. Call on 0424 190 908 today or visit their website and simply click on the "ENQUIRE ONLINE" form.
Disclaimer: This article is of a general nature only and does not constitute professional advice. I strongly recommend that you seek your own professional legal and accounting advice in relation to your particular circumstances.
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