Mortgage
Custom Search
 

Home
Second Mortgages
Home Mortgage
Bad Credit Home Loan
Mortgage Refinance Rates
Adverse Credit Mortgage Loan
Home Equity Loan
Best Homeowner Loans
Poor Credit Mortgage Refinance
Zero Down Mortgage Loans
Sitemap
 
Buying a Home when Self-Employed
by Tracey Anderson

Small businesses and self-employed individuals are what drives much of the Australian economy, yet self-employed home buyers face unique challenges when trying to qualify for a mortgage. In particular, the paperwork requirements are typically subs ..

Small businesses and self-employed individuals are what drives much of the Australian economy, yet self-employed home buyers face unique challenges when trying to qualify for a mortgage. In particular, the paperwork requirements are typically substantial, since self-employed persons do not have the same easy proof of income others do. When you work for somebody else, simply bringing in a check stub or statement from your employer is proof enough, but if you are self-employed, this isn't a possibility. Lenders must guard against fraud, and protect themselves against self-employed borrowers who overstate their income. This is why lenders will either require either an almost unmanageable amount of paperwork and verification, or a significantly higher than average down payment. Also, stated taxable income is often kept to a minimum as self-employed persons and their accountants take advantage of every deduction possible. Self-employed persons may also find it difficult, or even impossible, to separate their personal and business finances. If they have not been self-employed for a long time, up-to-date financial statements may not yet be available.

Banks have become more willing to work with self-employed individuals, and recognize that many such persons earn incomes far above the national average. Median self-employed incomes vary by state, but as an example, a PayScale survey (http://www.payscale.com/salary-survey/aid-9542/raname-SALARY/fid-7636) reports that the average self-employment income in the ACT is $46,633.

Fortunately, many lenders have special programs that offer a simpler option for self-employed individuals. Low documentation loans are specifically designed for those borrowers who find it difficult, because of reasons of self-employment, to comply with the usual requirements for income verification. A low documentation loan requires a borrower to complete a declaration of their financial situation. The declaration is a simple form which allows the borrower to make a statement regarding their income, without having to provide evidence. Good credit and a high down payment is usually required to obtain a low documentation loan. Because there is a high down payment requirement, lenders mortgage insurance will typically not be required.

While there are many mortgage products in Australia that require just ten percent down, a low documentation loan will usually require the borrower to have a substantial equity stake, in some cases 40 percent or higher. If you qualify for the First Home Owner Grant (http://www.firsthome.gov.au) however, some banks may be willing to count this grant towards the down payment. National Australia Bank (http://www.mortgagemall.com.au/national_bank_home_loans.html) was one of the first banks to start offering low-documentation loans to self-employed borrowers, offering a package that does not penalize self-employed individuals with higher fees and interest. NAB's low-documentation loan product comes in the same variations as any other standard loan, and you can choose from fixed and variable interest rate options.

Some sub-prime lenders, such as Liberty Financial (http://www.liberty.com.au), also provide low-documentation loans for self-employed. Liberty's Nova program is designed specifically for self-employed borrowers, and it also includes a Jumbo option for high net worth self-employed persons, offering loans up to $10 million.

Although most lenders do require a significantly higher than average down payment, in some circumstances, you may be able to find a low-documentation loan for as little as 20 percent down payment.

Copyright 2006 Tracey Anderson

Tracey Anderson is a mortgage broker with 16 years experience in the Australian mortgage industry. For personalised information from leading independent brokers, visit http://www.mortgagemall.com.au

 
NB: This site is not responsible for any content in it. Email us at daviscarlod4(at)gmail(.)com
atlanta austin boston chicago cleveland dallas denver detroit honolulu houston inland empire kansas city las vegas los angeles miami minneapolis nashville new york orange co philadelphia phoenix portland raleigh sacramento san diego seattle sf bayarea st louis tampa bay wash dc alabama alaska arizona arkansas california colorado connecticut delaware dc florida georgia guam hawaii idaho illinois indiana iowa kansas kentucky louisiana maine maryland mass michigan minnesota mississippi missouri montana nebraska nevada n hampshire new jersey new mexico new york n carolina north dakota ohio oklahoma oregon pennsylvania puerto rico rhode island s carolina south dakota tennessee texas utah vermont virgin islands virginia washington west virginia wisconsin wyoming alberta brit columbia manitoba n brunswick newf & lab nova scotia ontario pei quebec saskatchwn territories abbotsford calgary edmonton halifax hamilton kelowna montreal ottawa quebec st john's toronto vancouver victoria winnipeg more .. bangladesh china india indonesia iran iraq israel japan korea kuwait lebanon malaysia pakistan philippines singapore taiwan thailand turkey UAE vietnam west bank au/nz australia micronesia new zealand argentina bolivia brazil caribbean chile colombia costa rica dominican ecuador el salvador guatemala mexico nicaragua panama peru puerto rico uruguay venezuela africa egypt ethiopia ghana kenya morocco south africa tunisia austria belgium bulgaria croatia czech repub denmark finland france germany great britain greece hungary iceland ireland italy luxembourg netherlands norway poland portugal romania russia spain sweden switzerland turkey ukraine UK amsterdam athens bangalore bangkok beijing barcelona berlin budapest buenos aires delhi dubai dublin hong kong london madrid manila melbourne mexico moscow paris rio de janeiro rome seoul shanghai singapore sydney tel aviv tokyo zurich