Self-Employed Professionals – What Are The Mortgage Obstacles They Face?

Paper Work and More Paper Work – It Never Stops!

Most of the economy of the Australian continent is driven by either self-employed professionals or small businesses. However, anyone that works for themselves and is looking to buy a home faces obstacles distinct to being self-employed. The paperwork and documentation requirements alone are often mind-boggling, simply because someone working alone doesn’t have the ability to demonstrate proof of steady income like someone with a full-time job does. An employee working for a boss gets a paycheck, and the attached stub is usually enough to prove income. If you work for yourself, you can’t do this.

Lenders have to protect themselves and their investors against all forms of fraud, and unfortunately, some individuals claiming to be self-employed either are not in fact, or are just overstating how much money they make. That’s the reason why lenders require a mountain of documentation or an unusually large down payment; they aren’t looking to torture anyone, but they have to watch out.

Another potential issue in situations like this is that many self-employed professionals actually minimize their taxable income deliberately, with help from their accountants. They do this to benefit from all possible tax breaks and deductions, but it makes their stated taxable income lower levels than lenders might like. In the worst cases, self-employed professionals have business and personal deductions that get mixed up. Also, professionals without a long history of self-employment may not have the length or history of financial statements lenders like to see.

What Choices Do Self-Employed Professionals Have?

Banks and lenders are increasingly willing to partner up with self-employed professionals, and many institutions are now aware of the fact that individuals working for themselves often earn more than the average per capita citizen. Luckily for the self-employed, most lenders and brokers offer programs that simplify things for them. Low doc loans are particularly offered to make things easier for borrowers who work alone.

If you are self-employed and you want to apply for a low documentation loan, then you have to finish a total declaration of your full financial situation. The form itself is simple, and it lets you provide information regarding your income without substantiating documentation. You’ll also need a higher than usual down payment and good personal credit. Since the down payments tend to be larger, you usually will not need lenders mortgage insurance.


Do You Have A Deposit?

If you are familiar with the mortgage products on the Australian market, then you know that 10-percent down is standard. However, low doc loans are not standard, even if widely available, so the borrower is going to have to go in with a more potent equity stake. You can expect to be asked for at least a 20-percent down payment, if not more. On the other hand, if you personally qualify for a First Home Owner Grant, your lender might let you apply this grant towards saving up your down payment.

Among the first ever banks to offer low-doc loans was National Australia Bank, helping out self-employed professionals with packages that didn’t punish people working for themselves with unnecessary interest and fees. NAB’s low-doc loans are offered in similar packages to standard financing options, and fixed and variable rate packages are both available.

Sub-prime lenders, like Liberty Financial, are among other low-doc loan providers. Liberty has a Nova program created with self-employed professionals in mind; there is even a Jumbo option for entrepreneurs of high net worth, with loans in the neighbourhood of $10 million available.