Self-employed and want a home loan?
An alt-doc loan might be right for you
When you’re self-employed or own your own business, the challenges of managing admin, finances, and income flow are well-known. Keeping everything on track can be tough, and the last thing you want is for your home loan application to be rejected due to paperwork.
But here’s some good news: alternatives are available. Here, four steps that can be taken by self-employed individuals to facilitate the process of securing a home loan are outlined
Sort out the paperwork you do have
When assessing a home loan application, mortgage lenders typically seek a consistent income level that assures them of your ability to meet repayment obligations. Begin by presenting documentation that demonstrates your continuous self-employment and regular monthly earnings. Such evidence strengthens your case.
As gathering all the necessary paperwork to substantiate your income can sometimes be challenging, certain lenders have devised an alternative approach known as alternative documentation (Alt Doc). This process caters specifically to self-employed individuals or small business owners who may be unable to provide the income documentation demanded by traditional lenders and mortgage insurers. Instead, they can provide valid information using alternative types of paperwork.
Pepper Money, the leading non-bank lender that spearheaded this loan type, focuses on specific criteria when evaluating an Alt Doc application:
- Minimum 6-month ABN registration for your business.
- Minimum 6-month GST registration for your business.
- Business Activity Statements (BAS), and/or
- Business Bank Account Statements, and/or
- An Accountants Letter.
These factors are taken into consideration by Pepper Money during the assessment process.
Be smart with your cash flow: Keep things on track
Utilizing a financial plan to effectively manage cash flow is highly beneficial for self-employed individuals. Clearing any existing debts, such as credit cards or personal loans, has a positive impact on cash flow and may even improve your credit score. This, in turn, can increase your chances of qualifying for a higher loan amount with select lenders.
Be upfront with your lender: Trust their experience
Right from the start, transparency regarding your business activities is crucial. This is especially significant when there are significant fluctuations, whether positive or negative, in the taxable income, reflected on your annual financial statements between different years. Alternative lenders such as Pepper possess extensive experience working with various self-employed borrowers and possess the expertise to assess the unique cash flow patterns of small businesses. They are well-equipped to understand and evaluate the intricacies of your financial situation.
Tackle the taxable-income dilemma: Get good help
The taxable income of self-employed individuals and small business owners poses a significant challenge. It’s crucial to consider how your current financial statements will impact your future borrowing opportunities. Seeking guidance from a financial adviser or tax professional to align your taxable income with your goals, such as purchasing a house, is a vital step in the process.
These suggestions can aid in planning your loan application. Numerous options exist for self-employed individuals seeking a home loan but have faced rejections from traditional banks.
For more information, contact us today. We can assist you in connecting with lenders who specialize in catering to individuals in your situation. If the major banks have declined your loan application, we may have solutions. Call us at 0431897286.
If you want to refinance your existing loans and consolidate debt, you can refer to this page or contact us now for free expert advice.
Disclaimer: Original content source: Pepper Money. It is designed for publication through Accredited Brokers, to provide you with factual information only, and it is not intended to imply any recommendation about any financial product(s) or to constitute tax advice. If you need financial or tax advice you should consult a licensed financial or tax adviser. The information in the article is believed to be reliable at the time of distribution, but neither Pepper nor its accredited brokers warrant its completeness or accuracy. For information about whether a non-bank loan may be suitable for you, call us at 0431897286.