Top 10 tips for Self Employed applicants looking for a loan
21 Apr 2023
Here are some key tips for self-employed individuals looking to apply for a home loan:
- Gather your financial documentation: Self-employed individuals will need to provide more financial documentation than salaried employees. This may include tax returns, profit and loss statements, and a balance sheet.
- Show a consistent income: Lenders will want to see that you have a consistent income over time. Self-employed individuals should be prepared to show at least two years of tax returns and financial statements. There are some specialist lenders that will accept a new business, which is more than 3 months old.
- Keep good records: Self-employed individuals should keep detailed records of all business expenses, including travel, entertainment, and equipment purchases. This will make it easier to prove your income to lenders.
- Have a high credit score: A good credit score is especially important for self-employed individuals, as it can help to offset any concerns a lender may have about your income. It is not a deal breaker though, as we do have some specialist lenders that can lend to a low score.
- Be prepared to put down a larger down payment: Self-employed individuals may be required to put down a larger down payment than salaried employees if they want to opt for a low doc loan, as lenders will want to see that you have some skin in the game.
- Use a mortgage broker: A mortgage broker can help self-employed individuals find lenders who are more likely to approve their loan application.
- Consider alternative documentation loans: Some lenders offer alternative documentation loans, which take into account other factors besides tax returns when determining your income.
- Be prepared to provide additional documentation: Self-employed individuals may need to provide additional documentation such as business licenses, contracts, or other proof of business income.
- Be prepared to explain any gaps in income: Lenders may be concerned about gaps in income, so it’s important for self-employed individuals to be able to explain any gaps in their income history.
- Be honest: Be honest with your lender about your income and employment status. Lying or providing false information will only hurt your chances of getting approved for a home