How small business owners can get a home loan

When you’re a small business owner, it can feel challenging finding a home loan that accommodates to your financial situation. If you’ve taken the leap of faith to start a small business then you’re no ordinary borrower, so an ordinary home loan may not suit your goals and needs. 

Whatever your profits may be, the application process typically favours borrowers employed in full-time, 9-5 roles. These borrowers can can provide the income and financial paperwork a lender requires, such as group certificates or PAYG summaries.

A lender will look for stability in your finances to ensure you can afford your mortgage repayments. When you are a sole trader, for example, it can be hard to prove definitively exactly what your income will be month-to-month. And for the sake of risk assessment, this may be a challenge for some lenders. 

This is where an alternative home loan option may come in handy, such as a low doc home loan.

What is a low doc home loan?

If you are self-employed or are having difficulties getting a home loan due to an uneven flow of income, then a low doc loan may be suitable for you. 

Low doc literally means ‘low documentation’ and refers to financial statements, such as tax returns and pay slips.

Compared to standard home loans, a low doc home loan loans allow you to obtain finance without the traditional documentation, such as a payslip or proof if income from an employer. If you are your own employer, this may be a worthwhile option to consider to reduce your risk of your loan being rejected. 

Those eligible for a low doc home loan may include:

• Small business owners
• Self-employed people
• Professional investors
• People with bad credit
• Recent arrivals to Australia
• Seasonal or casual workers

Low documentation loans provide a home lending option for those that have difficulty presenting financial statements about their income. Be sure to check the product disclosure statement if you’re unsure. 

Keep in mind that low doc home loans may come with the added price tag of higher fees and greater interest rates, depending on the lender and your financial situation. As self-employed borrowers have less-stable income than traditional employees with pay slips, lenders offering low-doc home loans may also insist borrowers pay a larger deposit to secure the loan. Having an excellent credit history could help here to improve your options.

What alternatives are there to a low doc home loan? 

For small business owners looking for a home loan, it may be worth speaking to a mortgage broker for detailed, expert advice on your specific financial situation. After all, just because you don’t have traditional paperwork doesn’t mean you can’t be eligible for a home loan. 

In many instances, your take-home pay and credit score could be much higher than the average office worker, so why should you be penalised? This is where a mortgage broker may be able to guide you down a path towards home loan options that best suit your needs, including lower rate or lower fee home loans.

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