Common Concerns of Self-Employed Buyers

Many clients ask:

• How do I prove my income?
• Can I use overseas savings?
• What deposit do I need?
• Am I eligible if I own other properties?

Let’s address these questions.

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Documentation Requirements

Lenders want proof of your income and financial stability. Typically, you'll need:

• Two to three years of financial statements, such as:
  • Business Activity Statements (BAS) if you're registered for GST.
  • Tax returns (Notice of Assessment).
  • Profit and Loss statements prepared by an accountant (if applicable).
  • Bank statements showing income deposits.
• Ayo income stability: lenders prefer consistent income over multiple years.
• If your income fluctuates, explain the reasons and provide supporting documents.

Tip: Keep your financial documents organized. Using a reputable accountant can streamline this process.

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How to Prove Your Income

For self-employed individuals, proving income is essential.

• If you’ve paid yourself a consistent salary, pay slips help.
• For sole traders or business owners, tax returns and BA statements are critical.
• Some lenders may ask for business bank statements covering 6-12 months.

Genuine income: If your income varies seasonally, provide a minimum or average over several years to demonstrate your ability to repay.

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Using Overseas Savings or Income

Many international clients ask: "Can I use savings or income from overseas?"

The answer: Yes, but with conditions.

• Savings must be legally transferred into your Australian account.
• Lenders prefer consistent sources of funds, like genuine savings or income.
• You may need to provide proof of origin of funds, such as bank statements or transfer records.
• For income from abroad, they may require foreign income documentation, translated and validated.

Note: The Foreign Investment Review Board (FIRB) rules apply if you are a non-resident or on certain visas. Make sure you comply with FIRB approvals when purchasing.

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The Deposit - How Much Do You Need?

In Australia, a typical minimum deposit is 5-20% of the property value.

• Loan to Value Ratio (LVR): The percentage of the property's price the bank will finance.

Example: Buying a $600,000 home with a 10% deposit:

• Deposit: $60,000
• Loan amount: $540,000

Note: If your deposit is less than 20%, you may need to pay Lenders Mortgage Insurance (LMI), which protects the lender if you default.

Tip: Saving for a larger deposit can reduce your borrowing costs and avoid LMI.

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Eligibility Criteria for Self-Employed Buyers

Lenders usually check:

• Credit history: No recent defaults.
• Income verification: As detailed above.
• Property type: Not all lenders finance certain properties.
• Visa status: You must have an eligible visa to purchase residential property.

Important:
For non-residents or those on specific visas, FIRB approval is mandatory before purchasing.

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Special Scenarios

First-Time Buyers vs. Investors

• First-time buyers often qualify for assistance, grants, or stamp duty concessions.
• Investors need to prove rental income or plans to rent out the property.

Purchasing with a Partner

Pooling income with a partner—especially one with a stable income—can improve loan approval chances.

Using Superannuation Savings

While Super is designed for retirement, some lenders consider it as part of your savings for a deposit under certain conditions.

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Navigating Lender Policies

Different banks and lenders have varying policies for self-employed borrowers:

• Major banks: Generally more conservative; strict documentation.
• Non-bank lenders: May offer more flexible criteria, but at higher interest rates.
• Mortgage brokers: Can help match your situation with suitable lenders.

Expert Tip: Always compare interest rates, fees, and lending criteria.

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The Role of a Mortgage Broker

A mortgage broker is a licensed professional who can:

• Assess your financial situation
• Explain your borrowing options
• Help gather necessary documents
• Negotiate with lenders for the best deal

Many self-employed clients find brokers invaluable—they understand the nuances and can streamline the process.

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Additional Tips for Self-Employed Borrowers

• Maintain good credit: Clear existing debts and pay bills on time.
• Save consistently: Regular deposits strengthen your application.
• Plan ahead: Allow enough time for paperwork and approvals.
• Seek professional advice: Consult with a financial planner or accountant experienced in Australian property.

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Final Thoughts

While self-employment adds complexity to securing a home loan, it is entirely possible. Preparation, thorough documentation, and understanding lender criteria are key.

Remember, “Persistence and proper planning” are your best allies. With over 20 years of experience helping clients from diverse backgrounds, I’ve seen how determination—and the right advice—can turn property dreams into reality.

If you’re ready to take the next step, connect with a professional, organize your documents, and start your journey toward owning your home in Australia. Success is within reach!