Guide to Home Loans for Self-Employed Borrowers

You’ve taken the bold step of being your own boss, and now, you’re ready to take another significant leap—buying a home. But you might wonder, ‘Can I get a home loan if I’m self-employed?’ The answer is a resounding yes! While your experience might differ from getting a standard mortgage, you can successfully secure a home loan that suits your unique situation, especially with the help of seasoned local mortgage brokers like Deltos Finance. Today, let us help you learn more about home loans for self-employed and boosting your chances of mortgage approval. 

How Are Self-Employed Home Loans Different? 

Lenders view self-employed applicants through a slightly different lens. Unlike regular employees or pay-as-you-go (PAYG) workers with steady, predictable incomes, self-employed individuals often have fluctuating earnings. This variability can make it challenging for lenders to assess your ability to make consistent repayments.

But don’t let this discourage you! Lenders aren’t trying to put obstacles in your path; they’re simply doing their due diligence to ensure you can comfortably manage your loan repayments. Now that you understand the lender’s perspective, you can better prepare your home loan application to address their concerns head-on.

Home Loan Options for the Self-Employed

The good news is that several types of home loans are available for self-employed borrowers. Let’s explore some of the most common types:

• Full Doc Loans: If you have a solid track record and all your financial documents are in order, you might qualify for a standard mortgage with competitive rates.
• Low Doc Loans: These loans require less documentation but may have slightly higher interest rates. They’re ideal if you have a strong asset position but complex income structures.
• Alt Doc Loans: An alternative documentation loan allows you to verify your income through means other than traditional tax returns, such as bank statements or business activity statements. 
• Variable-Rate Home Loans: These types of home loans offer flexibility with potentially lower rates, but your repayments may change as interest rates fluctuate. A variable home loan structure can be advantageous if the lower rates come in periods when you’re not earning much. 
• Fixed-Rate Home Loans: If you prefer certainty in your budgeting, a fixed-rate mortgage locks your interest rate for a set period. You can anticipate your repayments and plan better to manage your cash flow more efficiently. 

Proving Your Worth: What Lenders Will Ask For?

When applying for a home loan as a self-employed borrower, be prepared to provide more comprehensive documentation than a typical regular or PAYG employee. Here’s what you’ll likely need:

• Two years of personal and business tax returns
• Notice of Assessment from the ATO for the past two years
• Business Activity Statements (BAS)
• Profit and loss statements
• Bank statements (personal and business)
• Details of your assets and liabilities
• Proof of any rental income
• Evidence of good financial management (e.g., consistent savings, timely bill payments)

If you don’t have all this documentation, you should highly consider an alt-doc or low-doc self-employed home loan. That type of mortgage will be more suitable to your situation and enable you to acquire your dream home faster than expected.

Pro tip: Keep your personal and business finances separate. This makes it easier for lenders to assess your financial position and demonstrates your ability to repay loans. 

New to Self-Employment? Exploring Your Options

If you’ve recently taken the plunge into self-employment (less than two years), don’t worry—you’re not automatically disqualified from getting a self-employed mortgage. While it might be more challenging, there are still options available:

• Use a guarantor: Ask a family member with property to act as a guarantor for your self-employed home loan. That can help boost your borrowing power.
• Consider joint application: Applying with a partner who has a stable PAYG income can strengthen your home loan application.
• Explore specialised lenders: Some lenders offer products specifically designed for newly self-employed individuals with strong business plans and projections. Be sure 
• Pay a larger deposit: Demonstrating your ability to pay a larger home loan deposit (20% or more) can offset some of the perceived risk associated with your shorter self-employment history. That can help convince lenders to consider your application for home loans for self-employed.
• Demonstrate industry experience: If you’ve worked in the same industry before becoming self-employed, this can work in your favour. So, keep your old payslips and ask for references from your previous employers.

Boost Your Chances of Loan Approval with These Strategies

Want to increase your odds of getting that ‘Yes’ from the lender? At Deltos Finance, we take pride in having one of the highest loan approval rates across mortgage brokers in Australia. Here are some strategies that have helped our past clients:

• Clean up your credit score. Before applying for home loans for self-employed, check your credit report and address any issues to improve your credit score.
• Reduce your debt. Pay down credit card bills and other existing debts to improve your debt-to-income ratio.
• Save for a larger deposit. Make it a target to pay at least a 20% deposit to show you’re capable of repaying your mortgage. Doing so also helps you avoid the often costly Lender’s Mortgage Insurance.
• Keep detailed financial records. Since you don’t have payslips or enough tax returns to show your financial capacity, you can only rely on organised, up-to-date books to demonstrate financial responsibility.
• Consider using an accountant. Professional financial statements can lend credibility to your self-employed home loan application.
• Be upfront about your finances. Transparency about both good and challenging periods in your business can help build trust with lenders.
• Maintain a consistent income: When applying for a home loan for self-employed, try to show a stable or increasing income over time.
• Separate personal and business expenses: As mentioned, this clarity between your finances helps lenders assess your true financial position.
• Consider your timing. If possible, apply after a strong financial year for your business.
• Seek professional advice. A mortgage broker experienced in self-employed home loans can help you be more strategic and intentional. If you’re a first-time homebuyer, they can also help you explore grants like the First Home Owner Grant & other government schemes to acquire your desired property.

Partner with Deltos Finance for a Better Home Loan Application 

Why struggle with paperwork and uncertainty when you could be focusing on what you do best—being your own boss? Let Deltos Finance take the stress out of your self-employed home loan application. Our expert mortgage brokers in Launceston, Hobart, Carlton and other parts of Tasmania understand the unique challenges you face and have the knowledge and relationships with lenders to find the perfect loan solution for your situation. With our high approval rates and personalised & expert guidance, you’ll hold the keys to your new home before you know it.

Contact us today to schedule an initial meeting.