Applying For A Home Loan As A Self-Employed Borrower

Lenders assess those with self-employed income differently from PAYG borrowers, often requiring extra documentation to verify income stability. This page will walk you through everything you need to know about applying for a self-employed home loan, from lender requirements and document preparation to loan options and expert tips for approval.

Who Is Considered Self-Employed

Self-employed people are individuals who earn income through their own business or independent, non-salaried work, rather than receiving a fixed wage from an employer.

Examples of self-employed borrowers:

• Business owners
• Freelancers and independent contractors
• Company directors and shareholders
• Tradespeople (such as electricians, plumbers and builders working independently)
• Self-funded retirees (earning income through investments rather than employment).

Lenders assess self-employed borrowers differently than PAYG applicants. While requirements vary, most will look for:

• ABN and GST registration: An ABN active for at least 6-24 months. GST registration may be required if your business earns over $75,000 a year.
• Proof of income stability: Most lenders prefer at least two years of tax returns, but some accept alternative verification of income.
• A good credit score: A score of 650-plus is recommended for better approval chances.
• Consistent cashflow and business performance: Lenders check business financials, bank statements, and profitability.

Lenders require specific documents to assess your income and financial stability.

Requirements vary but you may need to provide the following.

Required Documents When Applying For A Self-Employed Loan

• Personal tax returns from the two most recent financial years
• Most recent ATO Notice of Assessment or an accountant’s letter that confirms tax returns are final and lodged with the ATO
• Business tax returns from the two most recent financial years
• Business financial statements that an accountant prepares. These include the last two consecutive years of Profit-and-Loss statements, balance sheets and depreciation schedules from the most recent financial year.
• Proof the business has traded profitably in the two most recent financial years
• An ABN active for a minimum of 6 to 24 months
• A Business Activity Statement if your business earns more than $75,000 a year
• Trust deed and distribution statements, if applying through a trust structure.

Missing or incomplete paperwork can slow down the approval process, so ensuring your documents are in order is crucial

Home Loans For Those Self-Employed More Than 2 Years

If you’ve been self-employed for more than two years, you’ll have access to a wider range of lenders and loan options. Most lenders require two years of financial records to assess income stability, making full-doc home loans the preferred choice for borrowers in this category.

Lenders typically look for:

• Two years of financial records, including tax returns and bank statements
• Proof of consistent income and business performance

Home Loans For Those Self-Employed 1-2 Years

Even if you’re newly self-employed, you may still qualify for a home loan. Some lenders assess your overall financial position, industry experience, and alternative income verification rather than strictly requiring two years of tax returns.

Some lenders will still consider your application if you:

• Have at least one year’s tax return or can provide alternative income verification.

• Recently started your own business but have previous experience in the same industry.

• Can provide supporting documents like business bank statements or an accountant’s declaration.

We work with lenders that approve loans for those self-employed for one to two years, provided they have industry experience and at least one year’s financials for the business.

Example: A plumber who has operated their own business for one year but was previously employed as a plumber for five years may qualify.

Home Loans For Those Self-Employed Under 1 Year

Most banks require at least one year of tax returns, but some specialist lenders may approve loans with as little as six months of self-employment history. However, additional conditions may apply:

• Higher deposit requirements: You may need a larger deposit to offset the perceived risk.
• LMI (Lenders Mortgage Insurance): Some lenders charge LMI even if borrowing below 80% loan-to-value ratio (LVR).
• Alternative income verification: Instead of tax returns, lenders may accept:
  • Six months of business bank statements
  • Six months of Business Activity Statements (BAS)
  • An accountant’s letter confirming income and business performance.

If you’re newly self-employed, you may still have financing options. We can help you find lenders that accept alternative documentation and offer competitive loan products.

Ways To Improve Your Chances Of Home Loan Approval

Improving your home loan application starts with maintaining a strong credit score by regularly checking your credit report, fixing any errors, and making payments on time. Lenders also look for genuine savings, so having a consistent savings history can reassure them of your financial discipline. If possible, applying with a co-borrower who has a stable income can strengthen your application and increase borrowing capacity.

A larger deposit helps reduce your loan amount and lowers your LVR, making you a lower-risk borrower. You can also opt for a longer loan term, which lowers monthly repayments and improves affordability in the eyes of lenders.

Taking these steps can enhance your approval chances and help you secure a loan that fits your needs. Read our full guide to home loan approval.