Is it difficult for the self employed to get a home loan?

Some bank staff prefer not to deal with self employed borrowers, because getting them qualified and approved is more complicated and onerous than with borrowers who work for a salary. But there are plenty of others that welcome business from the self employed. A major problem with lending to the self-employed is collecting documentation as evidence to prove the applicant’s income to the lender’s satisfaction. Applicants with jobs can provide lenders with pay slips and lenders can verify the information by contacting the employer. With self-employed applicants, there are no third parties to verify such information. To get a self employed home loan, most lenders require you to be self employed for at least two to three years. If you’ve been self-employed for less than one year, there aren’t many options. Most banks won’t lend to you because you don’t yet have tax returns to prove your income, and because new businesses have more financial uncertainty. Most lenders will require at least two years’ tax returns and two years of financial statements. It gets even more complicated when there are family trust structures or self-managed super fund involved. The assessment process can be complicated and time consuming, especially when the declared income comes from a corporation or a partnership. For complex loans, such as complex trust structures with multiple companies and trusts, often handled by bank staff that lack the experience to understand what’s happening with how the income funnels through different legal structures or if you’re using income protection payments. Common mistakes such as double counting the expenses twice (e.g. failed to add back interest on loans) or not realising the benefit a self employed person receives from tax deduction on their company car expenses. If your loan is complicated, often bank staff may take their time to get your application confirmed by senior staff. Experienced staff or brokers would talk to your accountant and then speak to the credit assessor to ensure they understand exactly what’s going on.