If you are self-employed, you may be concerned about the prospect of applying for a home loan. It is a daunting prospect, and you will need to provide additional details surrounding your financial situation. If you plan and set a goal, you will be able to secure a home loan, but there are five big tips we can impart as you embark on a home loan journey as a self-employed person.
- Use a Mortgage Broker
Whether you are ready to purchase or simply thinking about shopping for a home, you should speak to a mortgage broker early. As experts in the industry, they can ensure you are on the right path. A mortgage broker can help you build a plan, set achievable goals, and ensure you are taking the steps you need to successfully secure a home loan. Find the best mortgage broker Sydney and make a list of questions you can have answered.
- Manage Your Tax Returns
One of the most important things for self-employed people to secure a home loan is to be proactive with tax returns. As a self-employed person, you aren’t going to have a regular payslip to show your finances. So, your tax returns are vital. Any lender you work with will want to see a record of your tax assessment documents because they have to verify your income before approving you for a loan. Typically, a lender will want to see at least two years’ worth of tax returns. So, if you have only started working for yourself recently, you will need to wait until you have filed your first tax return before you try to secure a home loan. In the meantime, you can save.
- Consult a Financial Expert
Depending on the size of your business, you may find that working with a financial expert at tax time is important. Sit down with an accountant and explain that you want to purchase a house within the next 12-24 months, and they can help ensure your financials are in order. An accountant can also ensure you are making the right tax deductions, which could mean even more cash in your deposit fund.
- Start A Deposit
The bigger the deposit, the lower the risk you present to lenders. While the typical borrower should have at least 20% saved, as a self-employed person you may want to aim higher to make yourself an attractive borrower.
Set a deposit goal and make a plan to get there by a specific date. You should review your finances to look at areas you can cut back on to save more. It’s normal for self-employed people to experience fluctuating income. So, when things are going great, be sure to save extra. Cash flow can be difficult, but if you opt for a percentage of income then you can commit that to your savings regardless of the actual cash number you’re bringing in.
- Make Money Move
Getting your tax documents and your deposit in order is all well and good, but there are other smart money moves you can make. Look at your debt and what you can pay down because that also factors into a lender’s decision. The quicker you can pay off credit cards and personal loans the better. It will increase your credit score and make you more reliable in the eyes of lenders.
It might be more challenging for you to secure a home loan, but just because you’re self-employed doesn’t mean it’s out of reach.
