When you’re self-employed, getting a home loan can involve a few extra steps.

Being self-employed and running a successful business can be immensely rewarding, but it can make the process of applying for a home loan a little more complex. But it doesn’t make it impossible.

For whatever reason, lenders classify a self-employed person as a higher risk than a PAYG full-time employee, so they ask for a few more details to ensure that your business is stable and provide you with an income sufficient to service any loan.

To access a full document home loan and the lowest rate., the most important criteria is that your business will need to be operating for at least 2 years. This is because lenders will want to see financial stability in your business’ performance.

Broadly speaking they will ask you for a few more pieces of information above the usual documentation required when applying:

• Proof that your ABN has been registered for at least 2 years

• Last 2 years’ personal and business tax returns and tax assessment notices

• Balance sheet and profit and loss statements covering the most recent 2 years

• Details of any external liabilities: leases, hire purchase, overdrafts, company loans and/or guarantees

• Last 1 month’s business bank statements

There are some other options available if you do not have all the paperwork required. These are known as low or alternative document home loans (or low doc/alt doc loans) for those who are unable to provide the full financial records for your business.

Low/Alt Document Home Loans

A low documentation (low doc) home loan is a type of loan that is suited for self-employed borrowers who can’t supply conventional proof of income required for typical home loans. 

A low doc loan is beneficial to the borrower as it involves a simplified income declaration form and alternatives to tax returns as income evidence, such as two consecutive BAS statements, bank statements, or a completed accountant’s declaration.

It is important to note that this loan type does not involve providing less evidence of income, as it’s about providing alternative sources to prove your income. 

Whilst a low doc loan is a useful tool for self employed borrowers to apply for a home loan, the increased risk perceived by the lender may result in a higher-than-average interest rate and more limitations in terms of the maximum loan to value ratio (LVR), such as being below 85%. 

Find out more on the pros and cons of a low doc loan here to determine if it’s the right loan for you. 

Not all lenders will offer a low doc loan, so before applying it's worth contacting me to work out your net income and the amount of loan you can realistically afford to service on a regular basis.