If you're a self-employed borrower or you own a small business, you are already familiar with the ongoing challenges of keeping your accounts, finances and income flow all on track. It's not easy.
But here's some good news. Getting a home loan doesn’t have to be yet another financial issue to worry about. Here are four steps that every self-employed borrower can take to help.
1. Know your numbers: And the different ways they show up
When lenders are assessing a home loan application, they generally look for a steady level of income that shows them you are able to make your mortgage repayments. Start by showing the paperwork that tells them that you have been self-employed for a consistent amount of time and that you earn a regular amount each month. Being able to show these things will work in your favour.
At Pepper Money we understand that it’s sometimes challenging to provide all the paperwork necessary to document your income. Our alternative documentation process (Alt Doc for short) is designed to meet the unique needs of self-employed or small business owners who can't provide the same income documentation required by traditional lenders and mortgage insurers.
When we assess an 'Alt Doc' application some of the things we look for are:
- Has your business been ABN resgitered for at least 12 months?
- Has your business been GST registered for at least 6 months?
- Business Acivity Statements (BAS)
- Bank Account Statements
2. A fast track to your goals: Be up front with your lender
From the outset, it's really important to be upfront about what's been going on in your business. This is particularly essential if there are any large variations up or down in the taxable income shown on your annual financial statements from one year to the next. At Pepper we have experience with a range of borrowers who are self-employed and we’re familiar with assessing the particular cash flows of small businesses.
3. Tackling the taxable-income dilemma: Get good help
One of the major challenges self-employed people and small business owners face is their taxable income. The thing to consider when you address this question for your business is how your financial statements will impact your borrowing options in the future. Talking to a financial adviser or tax professional about your goals when you work out your taxable income is an important step.
4. Smart cash flow: Keep things on track
Making the most of your cash flow using a financial plan can be beneficial for people who are self-employed. Paying off any outstanding debts such as credit cards or personal loans will positively impact your cash flow, and potentially your credit score, which may also mean you'll qualify for a higher loan amount with some lenders.
While these ideas can assist your loan application planning there are many options for self-employed people who are looking to get a home loan but have not yet been successful.
If you’re ready to take the next step in your home loan, speak to one of Pepper Money Lending Specialists today on 13 73 77 and we will try to find a home loan product that fits your financial goals.