Heading into 2024, securing a home loan as a self-employed individual can be complex. Working with a skilled mortgage broker like Zest Mortgage Solutions offers several advantages to navigating this process. They can help present your application effectively, prevent costly mistakes, provide innovative solutions, tailor your loan to your needs, and always act in your best interests.
Quick article summary:
In this article, we look at critical tips for self-employed home buyers, which include:
- Paying bills on time and regularly checking credit
- Organising financial documents and financial statements
- Keeping the application simple (our Zest speciality)
- Consulting experienced brokers and staying open to recommendations, like various loan product options you may not have previously considered
With that said, let's dive deeper into how you (as a self-employed person) can get a home loan in Brisbane in the easiest possible way.
How a Mortgage Broker helps self-employed people
At Zest Mortgage Solutions, we're expert mortgage brokers for self-employed, and we know you have it tough for home loans.
Our job is to help you present your application and leverage our experience to get you across the line. At Zest, we've got a 99% loan approval rate because we know the "ins and outs" of lenders and have 60+ lenders we work with to secure your loan.
Here's how our Zest mortgage broker team help:
1. Over 60 lenders to work with
At Zest, we work with over sixty lenders, each with their own unique strengths and loan products. For self-employed people and couples, having the ability to pick and choose matters, as self-employed loans can vary significantly to your needs.
2. More positively presenting your application
Both the information and the presentation are crucial when applying for self-employed loans. Professional mortgage brokers can put your business and personal finances in the best light for lenders and help guide you on the right amount for your unique situation.
3. Avoiding expensive mistakes
When applying for a home loan, we need to understand that the person reviewing your application may not be familiar with complex tax systems and irregular revenue sources. Understanding company vehicles, equipment, contracts, and other assets is vital, and where the Zest team can ensure your application is made for the reviewer while avoiding costly mistakes.
4. Innovative thinking
If you googled 'self-employed home loan' or "sole trader home loan', you probably saw articles around 'Low Doc' or 'No Doc' home loans. These kinds of loans might be easier to get as a self-employed person but could be harder to service - there are a lot of factors. At Zest, we review the finer details and submit a proposal based on what fits you best, not simply the masses.
5. A loan that fits you
Every lender and mortgage product has its pros and cons. Finding a lender and product that fits you is everything. For example, you might need cash flow allowances and want to look at various tax benefits. Getting your loan options right at the start is far better than adjusting loan terms as you go, which can be complex and expensive.
5. Experience on your side
At Zest, our mortgage brokers have applied for thousands of loans for all kinds of clients.
Self-Employed Home Buyer Tips
To ensure you have the best chance of securing your home loan (before meeting with your Mortgage Broker), we have five suggestions to make the process smoother and faster and provide a more favourable lending outcome.
Here are our 5 mortgage broker tips:
1. Always pay your bills on time
This may seem minor, but late bills, credit cards, and loans might hurt your home loan eligibility. A consistent bill payment history shows lenders you're conscientious, reliable, and trustworthy.
2. Well-organised documents
Disorganised financial data can be one of the most extensive delays for self-employed home loan applications. Start by completing your business and personal tax forms for the last two years and organising your financial data for easy reviewing.
3. Avoid overcomplicating
Most lenders like simplicity (our Zest speciality). If you have complicated tax tactics or leasing agreements, applying for a house loan may be trickier. Try to simplify things for your broker and lender as much as possible.
4. Your credit check
Every mortgage application requires a credit check to uncover any red flags or inaccuracies on your record. After getting a recent credit report (you're entitled to one free report per year), ask your mortgage broker to assist you in analysing the contents. Visit the Australian Government Money Smart website for credit score checking instructions.
5. Consult a seasoned independent mortgage broker
Talking to a broker like Zest Mortgage Solutions with expertise in managing self-employed loan applications will make things easier and boost your chances of securing the best house loan for your needs. Our experts offer specialised guidance and practical ideas that could save you months of work.
Why use a mortgage broker if you're in Brisbane, or anywhere in Australia?
The three big reasons to use a Mortgage Broker in Brisbane are below, and perhaps the most significant "unsaid" reason to use a broker is that we work for you, not the banks!
Here are five reasons to use a broker:
1. Speed - At Zest, we can significantly help speed up your application as we know the ins and outs of self-employed home loans, especially here in Brisbane.
2. Simplicity - Most self-employed people have a million things on their plate. A broker can help simplify everything into clear, quick steps.
3. Success - At Zest, we have a 99% loan success rate because we know how to craft and submit applications to the 60-plus lenders we work with.
4. Free - Most mortgage brokers are free to use and work by taking a small commission of the final loan you go with. There is zero cost to you.
5. Less-Stress - If you look at bank reviews (from the Big 4 or any other bank), you might see they are down a few stars. At Zest, we've over 200 x 5-Star Google reviews.
Self-employed home loan FAQs
Q. Does being self-employed make getting a home loan harder?
Yes, unfortunately, it does.
With 2.1 million business owners and 1.2 million single traders in Australia, you would think the process would be more straightforward. However, company tax returns, proof of income, one-off expenses, business cash flow and more all need to be submitted.
Working with a mortgage broker is the simplest way to apply and successfully get a loan from mortgage lenders. Lender to lender terms also varies significantly for self-employed business owners, with many extra steps that an employee would not need. Self-employed home loan applicants have it toughest. There is no easy way to say it.
Q. Is there a minimum time I must be self-employed before getting a mortgage?
Most lenders want self-employed borrowers to have been in the same circumstances for two years so they can supply two years of tax returns with a stable income - like a regular income with consistent income figures. Of course, that's rarely the case.
Some lenders may consider self-employed applicants with less than two years of experience. These lenders aid short-term self-employed consumers, although the deposit and interest rates are greater. That's where a mortgage broker specialist like Zest can help. It's all about understanding your unique needs and timelines.
Q. Is it worth applying for a home loan after one year of self-employment?
At this stage, we suggest booking a free call with our mortgage advisors. For example, some lenders may consider your eligibility based on your sector experience rather than self-employment. For example, some lenders may consider you more eligible if you worked as a mechanic for six years as an employee and a year as a self-employed mechanic - as you know your industry.
Other lenders and some major banks may approve applications with a 20% - 30% property deposit. However, individual situations differ, so please consult one of our mortgage brokers. We can also provide some pre-approval steps, loan tips that suit your unique circumstances and the loan structure you should look into.
Q. How is my self-employed income analysed for a home loan?
Instead of weekly or monthly income verification, most lenders require your tax records and business records for the prior several years (generally two-plus years). Lenders might want financial records like BAS and bank statements to show business turnover, super contributions, debts, Australian business registration, etc. It generally depends on the lender; however, you need to be prepared.
Q. What are low-doc loans for self employed people?
Low-doc loans are mortgages for self-employed (and employed) borrowers with little supporting documents. They were introduced in the late 1990s by non-bank lenders to those who needed help to qualify for a house loan under traditional lending standards. Most significant lenders, including banks, now offer low-doc loans. Self-employed borrowers may benefit from low-doc loans, but the downside is that these low-doc loans usually have higher interest rates or demand a more substantial deposit to mitigate risk.
Q. Which self-employed house loan application concerns are most common?
Common concerns and red flags on self-employed home loan applications must be removed before you submit your application. Red flags can include:
- Overly Successful businesses with clever accountants (where profits exceed appearances).
- Self-employed applicants with under two years of suitable average income.
- Rapid business growth (raising eyebrows and bank issues).
- Banks will use your lowest tax return figure, not the latest, so you need to consider that.
A skilled broker team can help you solve many of these challenges.
Q. What about add-backs?
Lenders will examine unusual company expenses when assessing your self-employed mortgage application. This might include business loan interest, asset depreciation, corporate car expenditures, or superannuation payments. Why do add-backs matter? Some lenders will 'add back' these costs to better estimate your income, while others won't. Correctly identifying and presenting add-backs can affect a self-employed mortgage application's approval.
Q. Will my unpredictable cash flow be a problem?
Unpredictable financial flow can be okay, as most lenders understand that self-employed people have a feast-and-famine cash flow cycle. Many lenders will look at your yearly income rather than weekly or monthly revenue, and that's why you need to keep your tax records in order. It is also preferred to have a clear reason for cash flow swings, i.e., explaining your business's contracts or sales. For example, you may have a seasonable business.
Summary on self-employed home loans as we head into 2024.
Home loans for self-employed individuals can be challenging, but Zest Mortgage Solutions Home Loans offers assistance to help them secure financing. The skilled team at Zest Mortgage Solutions understand that self-employed borrowers may have different documentation requirements than employees and can help present their situation for a fair and accurate application review.
Working with a self-employed mortgage broker can provide several advantages, including effective application presentation, avoiding costly mistakes, innovative thinking, customising your home loan to suit your needs, and talking to someone reliable.
A self-employed mortgage broker can help you navigate complex tax systems and irregular revenue sources, offering a proposal that best fits your situation. They can also help you customise your home loans, such as cash flow allowances and tax benefits, to benefit you and your company. A mortgage broker is also governed by 'Best Interests Duty', ensuring they operate in your best interests, unlike banks that do not have this duty.
Our top Zest tips include consistently paying bills on time, preparing your documents, avoiding overcomplicating, checking credit, consulting a seasoned independent mortgage broker, allowing your mortgage broker to advise you, considering self-employed home loan application time, and working with a broker who has submitted self-employed mortgage applications.
Working with a broker like Zest, who has submitted self-employed mortgage applications to maximise your chances of success, is key.
Get a free self-employed home loan consultation.
Zest Mortgage Solutions offers free Self Employed Loan consultations, where our experienced mortgage brokers can look at your business structure, business finances and assets, income to yourself and more, and work out the best strategy moving forward.
Simply get in touch with the Zest Mortgage Solutions team here.
