Getting a home loan- self employed

From my quick search it appears lenders want 2 years of tax returns as proof of business income.
I am in my first year of business, is there zero chance of me getting approved? What about after 1 year tax return? The business I am in is not related to my previous employment. I could easily prove income via my business bank account deposits. Any options or am I stuck for another 2 years?

The loan in question would be for a PPOR and only be approx $150k on a house valued $550K, very easily servicable. My 2nd question- do these types of loans generally have higher interest rates and/or tighter borrowing capacity rules. I hear LMI is applicable at lower LVR's.

Thanks.

 

How long has your abn been registered? Do you have Bas?

You can go the accountants declaration, rates will be higher than normal but you can just refi after a year or 2 and you’re all good.

 

If ABN is registered for 2 years plus - should be OK to use latest year with a few larger funders.

If not, what is your profession? You may be able to get an exception from a lender and use one year ABN. Alternatively there’s a few lenders who will accept 1 year ABN. Go there and then refi back out to a better longer term option the following year. On your loan size and LVR moving options should be simpler, so a shorter term solution is OK.

 

RAMS low doc with accountants declaration probably a good starting point

 

My business is gardening/lawn care/landscaping. My ABN was registered 12 months ago. 2016/2017 tax return does show some business income but pretty small profit as I really only started in Feb together with startup costs. My first full year tax return won't be until end of this financial year so I'm thinking I will need to wait until this occurs and find one of the lenders that accept 1 year return? Say July next year?, or do I also need to wait for two years of ABN - which would be Nov next year?

Some lenders mention proof of GST, I'm not GST registered as my turnover is below the threshold, would this be an issue? My expected taxable income this year (after expenses) will be around $50-$60k, I only need to borrow $150-$200k.

 

Having a look at RAMS the website says: don’t require the usual financial statements or tax returns. So this may be an option- only need an accountants declaration?

 

Rams can lend 70% up to 1mil with 12 months abn registration and an accountants declaration.

 

Another quick question, In terms of "other" income, would lenders take in account solar credits (FIT) received as income? My electricity "bill" I receive approx $3000 PA, this is guaranteed to 2028.

 

Hmm i've never seen it included, so i'd assume no (uphill battle as best case scenario with most, and limited funder selection as best case scenario).

It will partly depend on how this is provided back to you. I suspect it may also be considered as an expense reimbursement (rather than direct income).

 

Most banks would count this as a rebate of living expenses rather than income- for eg, what you include for power in your living expense would be minimal. In this regard it could help borrowing capacity but I don’t know of any lender that would include it as income.

 

No solar credits are not taxable.

How accurate are the lenders online borrowing capacity calculators? I've tried a few and they are all in the similar ball park but I'm thinking they may tend to be overly generous as a rule? Especially so for self employed applicants?

 

Welcome to the gardening "mowing" club

Yes it will not be easy
What is your relationship to your bank like ?

Ive been thru it
Have a good relationship with the CEO (was my former branch manager long ago) so my loans went thru, largely thanks to showing regular income (from a good contract) and a low LVR.
I have a PPOR owing 10%, and was knocked back by the loans dept for the CIP purchase (she got over ruled), then with the OTP I was handed straight to a business development officer (who still cant believe that I paid the deposit first and asked for the loan second ), both were overseen by my former bank manager, sometimes it pays not only to be nice, but memorable also (and i had his personal mobile number to text)
I was "questioned" about my expenses declaration, the $80 per quarter for electricity, so i sent a screen shot of my roof on Google Earth......

So it is "doable"
Just a matter of asking the right people
Good luck

 

Another quick question regards business expenses. When looking at income can the lenders account for certain business expenses like depreciation. Eg. if I have $10k in vehicle depreciation as a business expense this reduces my taxable income but it's not a "real" expense in terms of dollars spent, so can lenders add this expense back to your income to get a more realistic figure and improve your lending capacity?

 

Yes many lenders can add back depreciation and some other non recurring expenses.

 

Paul you would be better served having a discussion with a broker regarding your specific circumstances and they will be able to see if they can find a solution which fits your needs - than try to DIY it with 5% of the information required to make the right selection.

Pending on all of the specifics you may well be able to get it over the line. I've had to pop into the office today to help get a settlement completed for a client has a business with only 9 months trading history - qualified for a normal full doc lend.

 

Hi Paul,

A few of the banks only require one year's tax return now, so you will be good to go once you have done your return.