When you're self-employed and trying to get a mortgage, lenders will usually take a closer look at your application than they would for someone with a regular job. This is because it can be harder to prove how much income you have when you're self-employed. This extra level of scrutiny is necessary because self-employed people typically don't earn the same income every week - it can vary month to month.
The truth is that most lenders will require that you have been self-employed for at least two to three years. However, some lenders may also consider people who have only been self-employed for one year. The technicalities vary, so you may need to discuss the terms with your lender as well.
How about Those Who Are Self-Employed for Only Less than a Year?
If you've been self-employed for less than a year, there aren't many options for borrowing money from a bank. This is because most banks require tax returns to verify your income, and new businesses are considered to be more financially risky.
Fortunately, some lenders are willing to work with you if you can prove that you have the income to afford the loan, even if you don't have a current job.
This is because if you were to close your business, you could always get a job working for someone else with a similar salary. This means that if you have a property worth $100,000, you could borrow up to $80,000 (80%) from the bank.
How about Those Who Have Been Self-Employed for One to Two Years Already?
If you're self-employed and seeking a loan, some lenders may be willing to approve your application as long as you have a history of steady employment in the same line of work and at least one year's worth of financials for the new business.
A good example of this would be a plumber who has been in the industry for a total of six years, with one year of experience owning and operating his own business. This plumber is someone who has already transitioned from being an employee to being a business owner. This is a positive change because the plumber now has the opportunity to make more money and have more control over his work.
Ensuring That Your Credit Report and Credit History Are in Good Standing
Lenders are becoming more strict with their mortgage requirements, making it harder for many homebuyers to qualify. This is especially true for self-employed individuals, who often face more scrutiny when it comes to their credit history and income.
If you are self-employed, you can expect to have your credit checked when you apply for a loan and right before you close on the loan. It is difficult to say what credit score you should have, as it varies from lender to lender. However, if your credit score is in the 700s, you should be in good shape. If you have a score in the 600s, you may still be able to get a loan, depending on factors such as your income history and the stability of your self-employment.
If you're looking to improve your financial situation, one of the best things you can do is get rid of any high-interest debt that you have. This will help you avoid accruing more debt and free up more of your income for other things. Another good tip is to avoid applying for new credit cards with high-interest rates - instead, try to find low-interest options which will be more manageable for your finances.
Conclusion
It is still possible to buy a house in Australia as a self-employed person, but there are a few things to keep in mind. First, you'll need to have a good credit score and a steady income. Second, you'll need to be prepared to provide your income and employment history documentation. Finally, you may need to put down a larger deposit than someone who is employed by someone else. But if you're prepared for all of that, then you can absolutely become a homeowner in no time.
If you are looking for one of the best providers of self-employed home loans in Sydney, look no further than our services here at Wealthy You. We are an Australian Mortgage Company servicing Sydney for almost a decade and because of this, we can offer you a variety of mortgage solutions to meet your specific financial needs. Call us today and let us discuss all your available home loan options.
