The working landscape of Australia has changed dramatically over the last 20 years with more and more people choosing to start businesses and work for themselves. But what impact does this have on your ability to buy your dream home or purchase an investment property?

Suncorp Bank Lending Manager, Cameron Selwood, shared his tips on how to best prepare for a self employed home loan application.

Save, save, save!

Buying a house isn’t a small thing – a mortgage is a huge long-term commitment, and both you and your lender need to be confident you can pay it back. As a business owner you’ll know that financially, some months are better than others. This lack of ‘standard income’ can make things a little more difficult when it comes to getting a home loan. But this doesn’t mean it’s impossible!

“Although you might not have total control over your income, you do for your savings!” Cameron said.

“Since the Royal Commission, lenders are looking even more closely at potential buyers’ expenses, so being able to demonstrate good, consistent savings habits is one of the best ways to improve your chances of having a home loan application approved – for both employed and self employed workers.”

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Paper trail

Tax returns, notice of assessments, profit and loss statements and balance sheets are just the start of a long list of important financial documents required to begin the self employed home loan application process.

“The more documentation and information lenders have about your business the easier it is to get the application through,” Cameron said.

“If lenders ask for more information it’s not to be difficult. It’s because it will provide valuable details to help them better understand your business.

“If you can, telling your accountant you’re applying for a loan and allowing them to speak directly with the lender and provide any extra paperwork on your behalf can make the process a lot easier for you.”

Be prepared to explain

Although many dream of being their own boss, it isn’t always sunshine, roses and high profit margins. There will be hard seasons where nothing goes to plan, but this doesn’t necessarily disqualify you from becoming a home owner.

“It’s important that prospective self employed home owners are ready to explain their experience, business plans and the future risks of their business,” Cameron said.

“In some cases, lenders may be able to see trends in the financials, such as decreasing profits, and will need to know why, and what the applicant intends to do to ensure this isn’t ongoing.

“This commentary needs to be realistic and backed up with data, so it can be a good idea to get a business plan prepared by an accountant or business manager.”

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Published 7 October 2022