Property

How to buy a home when you're self-employed

RUNNING your own show is a dream for many workers - and it doesn't have to mean sacrificing that other great Australian dream of home ownership.

Self-employment can be personally and financially rewarding, and the latest Household Financial Comfort Report from ME Bank confirms that since mid-2014 self-employed workers have enjoyed a rise in financial comfort levels.

That's good news for the self-employed sector, and now could be the time for small business owners to take the plunge into home ownership - especially while interest rates are at record lows.

>> Hockey tells home buyers to get job that pays well

>> First home buyers need 'ambition': Abbott defends Hockey

>> Why Joe Hockey's comments are so appalling

Information is king

The process of securing a home loan isn't always as straightforward for self-employed workers as it is for traditional employees.

But that's not to say it can't be done.

The key stumbling block for lenders is determining whether self-employed borrowers have the capacity to manage loan repayments.

A PAYE borrower can provide pay slips as evidence of stable income, but most business owners would agree that their income fluctuates from time to time.

On the plus side, getting the right paperwork together can boost your chances of loan approval.

In particular, lenders look for consistency of income − this demonstrates that your business is ticking along and generating the income needed to maintain your loan repayments.

You'll need financial statements for the past two years, plus have both your business and personal income tax returns lodged and notice of assessments up to date.

Banks rarely accept financial statements that have not yet been lodged with the Australian Taxation Office.

Give your finances a spruce up

Further enhance your prospects of loan approval by tidying up your personal finances.

In determining loan eligibility lenders look at the credit limit on all your credit cards (not just the outstanding balance), so it can pay to cancel any unwanted cards and request a reduction in the limit on those cards you wish to hold onto.

Aiming to build personal savings over a period of six months will help to fund a home buying deposit, and it also demonstrates to lenders that you have the capacity and discipline to manage a home loan.

Seek advice

After you have all your paperwork together, make a date to speak with your broker or lender to establish what you can realistically afford to borrow.

This is critical to ensure you don't overcommit yourself.

Aim for a competitive rate

Finally, when it comes to selecting your loan, be wary of products pitched specifically at self-employed people, especially "low-doc loans".

These may require less paperwork but you can expect to pay a much higher interest rate.

If you can prove your income through up to date tax returns it is worth aiming for a regular "full documentation" loan and enjoying the savings of a competitive rate.

The top five things you need to know when buying a home:

  • Don't buy if you can't stay put
  • Start by shoring up your credit
  • If you can't put down the usual 20 percent, you may still qualify for a loan
  • Buy in a district with good schools
  • Before house hunting, get pre-approved

Topics:  gladstone property market real estate self-employed



ROAD CLOSURES: Gladstone Monto Rd bridge 200mm under water

Road closures across central Queensland.

Check back here throughout the day for up-to-date road closures.

Local Partners

Gallery: Standing room only as Rocky home sells for $1M+

PRICE IS RIGHT: This historic Rockhampton home at 165 Caroline St sold for more than $1 million at auction at the weekend.

Highly anticipated auction draws a big crowd

Going long-term in property? Women invest the best

Susan Farquhar

Investing in property? Trust a woman

Coast beach house has wide appeal

PRIME POSITION: The Alexandra Headland home features a tiled retreat opening to a covered deck with views from Alex Forest straight out to the ocean in front of Alex Surf Club.

Alex Headland home sits high, wide and handsome

Touch of history as property group launches Sunshine Coast office

David Handley, Marcus Muir, George Kafantaris, Scott Holmes, Brendan Dale, Bobbie Murphy, Kim Brand, Trina Martin, Kerry Croaker, Margie Sullivan, Peter Bell, Brook Monahan and Taylor Booysen at Mosaic Property Group's opening of their new Sunshine Coast office at Duporth Ave, Maroochydore.

Maroochydore the hub for property development group's expansion