Self Employed Home Loans
It can be difficult to obtain a self-employed home loan especially when the borrower has been in a situation where they have not been employed for the past two years or more. The policy for the majority of banks and credit unions dictates that they view at least two income tax returns by the applicant.
This indicates that the applicant had a steady income before handing them a contract. But the trickiest part is when most banks are reluctant to offer a loan due to the increased risk that is involved in the case of a self employed individual. This is because such individuals have little job security and their income may vary from month to month.
Home Loan Options
No-Doc Contract Loan
The criteria for a self employed home loan in Australia is fairly simple: if the prospective applicant has worked for himself for less than two years, one loan that can be offered is the ‘no-doc contract' which entails a scenario where the buyer does not have to provide the lender with any kind of documentation of tax income or other assets. It sounds like a simple and easy-to-do process but the disadvantage consists of a higher interest rate that is carried by the no-doc contract. It is usually two or three percent above the conventional loan. Regardless, plenty of applicants avail this offer as they realize that they can refinance their contract at a lower interest rate once they have two years' worth of income tax returns.
Owner Financing
An easier option to avail is to purchase a house from a seller that offers owner financing. This process requires relatively easier and manageable requirements, very little paperwork and quicker closing. The only catch is that the purchaser will be working with an individual instead of a lending institution. This requires hiring a real estate attorney to handle the entire transaction. This can be done easily by searching the internet for phrases like ‘motivated seller' who's willing to handle financing by themselves.
Advertise Transactions
In order to acquire self-employed home loans, you can also attempt to advertise transactions of a prospective nature. This enables the lender to take over the payments on the contract of the property. The borrower does not have to qualify for the loan. This option is often considered an attractive one because it offers conventional interest rates without going through the trouble of gaining approval from the lender.
Lease Option
Self-employed home loan options can also include leasing. This option permits the renter to build equity in a rent-to-own situation. When the renter and seller have agreed on a price for the house, the renter is allowed to shift into the property before the transfer of the title. The renter has to make monthly payments. By the end of the agreement, the renter may either vacate the property or apply the funds that have accumulated to gain a contract. This results in a down payment and time to gain the years-worth tax income returns that are needed for a conventional home loan.
It's Tough but Possible
Initially it may seem as though there is no solution for the self employed home loan but if the borrower is cautious while researching and investigating options, he/she will find a good deal to strike for themselves. I
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