Tips for obtaining Finance when you are Self Employed
If you are self-employed, obtaining finance to buy a property does not have to be a daunting task. If you are organised and on top of your admin and paperwork, you should be able to apply for a loan just as easy as anyone else. Lenders may be hesitant to take on self-employed individuals however, once you can demonstrate your earning capacity, you many be able to borrow more than you expected. To help you prepare before you talk to a lender, here is some advice that can help make the process quicker and easier:
Be honest with yourself – are you in a strong position to buy a property?
Take a moment to have a look at your business.
• Are you well established or just starting out?
• Do you have steady business or are you still building it up?
• Are you personally paying off loans for your business?
• Could you afford another payment?
• Can your current income afford to pay off a mortgage or do you still put some of your own money into miscellaneous business expenses?
Making your own honest evaluation of your current situation should be your first step in making the decision to buy a home.
Apply for you loan using your BAS statements
If you are the owner of your business, then using your business activity statements in your loan application will give the lender more information about your earning capacity.
Show the lender consistency
One of the reasons why lenders are hesitant to approve loans for people who are self-employed over those who are employees is because employees typically have a steady flow of income. Someone who is a full-time employee will get paid even when they are sick. This stability in their income means they are more like to stick to their payments. If you can demonstrate to the lender that you have been consistently making an income from your business over a substantial period, they will be more likely to approve your loan.
Check your Credit Rating
While everyone should check their credit rating before talking to a lender, this is particularly important for those who are self-employed.Perhaps you had to take out a couple of credit cards before you were making enough money from your business? Or you took out a business loan under your name? Every time you apply for credit, it goes into your credit report. If you are late making payments, even for payments on your mobile bill, that too can go against your rating. Checking your credit rating and report beforehand gives you the opportunity to check and rectify any mistakes. If there are some black marks, you can wait until they expire or at least, you can approach the lender without getting a nasty surprise.
Get your accountant to verify your income
If you can’t use BAS statements, your accountant should be able to fill out a Borrower Certificate of Income Declaration form. This will help prove that you do make enough to finance your home loan.