Loans for the self-employed

The credit crunch and resulting squeeze on liquidity, coupled with the Australian government’s recent crackdown on responsible lending, has made it harder for the self-employed to secure a home loan.

But with one in 10 Australians now self-employed, there is still a strong industry servicing this sector and opportunities are still available for self-employed borrowers – they just need to know where to look.

Here are a few steps that will help self-employed applicants find a home loan to suit their needs:

• Talk to a broker: A mortgage broker can assess your financial situation and help find a loan that suits your needs. They’re a good starting point for self-employed borrowers as they can also give you a range of other information to help make the process of securing financing more simple, and importantly, less stressful.

• Keep record: Ensure all your business records are up-to-date, simple to review and well structured – and this in not just for tax purposes. If you can highlight a savings history, regular income and a functional, well structured business that turns a profit for at least a two year period, you will significantly broaden your borrowing opportunities.

• Look beyond the banks: Non-bank lenders, including credit unions and building societies, may offer low doc and other loan products not offered by the banks. They may also have different requirements, so it pays to see what the alternative lenders are offering.

• Serviceability: Self-employed borrowers can be attractive to lenders if they can demonstrate ability to service a loan, regardless of business/cash flow fluctuations. Highlight other commitments you’ve been able to service on a regular basis. Again, your broker can help package up a good case for securing finance.