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Self Employed Home Loan: What Lenders Want
Self employed home loan: learn documents, income proof, and timelines to speed up approval. See what to prepare.
Running your own business should not hold you back from buying a home. It does mean lenders need clearer proof of income, steady trading history, and a simple story about how your cash flow works. This guide shows the practical steps that self-employed Australians can take to get a fair assessment. You will learn what to prepare, how to present your numbers, and where small tweaks can lift borrowing capacity.
Key takeaways
- Clear evidence of income matters more than job title or entity type.
- Simple, consistent documents reduce questions and speed up credit checks.
- Small levers like debt trims or savings buffers can lift borrowing power.
- Map your pre-approval timeline so there are no last-minute surprises.
Self-Employed Home Loan Basics
Self-employed home loan applications focus on the reliability of business income. Lenders check trading history, stability, and how profits translate into personal income after add-backs. For a sole trader or company director, the aim is to show consistent turnover, manageable expenses, and a buffer to handle quieter months. Keep the story simple and consistent across your documents.
Most lenders prefer an ABN that has been active for at least 12 months. Some want two income years, but others accept one if the current year is strong and well-supported by BAS. If your income grew sharply this year, be ready to show why the jump is real: new contracts, recurring subscriptions, or a larger client base can help explain it.
Example: a buyer wants a $600,000 property with a 10% deposit. That is $60,000 plus costs like stamp duty. With a loan of $540,000 over 30 years at an assumed 6.2%, indicative repayments are around $3,312 per month. Lenders will test this amount using buffers and may shade variable income. Your job is to make the income position easy to assess.
Key tip: normalise your story. Keep the same business name, ABN, and contact details across your tax returns, BAS, invoices, and bank statements. Small mismatches slow things down and trigger extra questions.
Set your foundations
- Confirm your ABN status and start date on the ABR site.
- Align business name, entity, and contact details across all documents.
- List income sources and contracts clearly, with dates and frequency.
- Prepare a simple one-page business overview.
What this means for Buyers
- A stable ABN history makes approval smoother.
- Consistent documents reduce back-and-forth with credit teams.
- Buffers and savings help counter income shading.
Quick Q&A
Q: Can one strong year be enough?
A: Sometimes. It helps if BAS, bank statements, and current contracts support the uplift.
Q: Do lenders treat sole traders and company directors differently?
A: They test stability in both cases. The documents differ, but the goal is the same: reliable income.
Related reading: Self-employed and borrowing basics
- Home Loans for the Self-Employed: Journey to Your First Home
- Borrowing Capacity Calculator - How Much Can I Borrow?
- How Credit Cards can Impact your Home Loan Application
Proving Income When You Run a Business
Lenders need to see how your trading translates into personal capacity to repay. For many, that means the latest tax returns and BAS, a full set of financials, and business bank statements. If you are a director, show dividends or wages and how they track across the year. If you are a sole trader, show steady deposits, clear invoices, and minimal cash-only work.
Some lenders allow add-backs such as one-off expenses, non-cash charges, or private car costs. Only include add-backs you can evidence. Keep a note that explains each item and where it appears in the accounts. Accuracy builds trust, which can speed up approvals.
Worked example: a sole trader with $160,000 turnover and $90,000 expenses shows $70,000 profit. Add-backs of $5,000 for a one-off tool purchase and $3,000 for non-cash depreciation lift assessable income to $78,000. At an assumed 6.4% test rate, this can mean the difference between a $500,000 and $540,000 borrowing outcome, depending on other debts and living costs.
Low-doc options exist but have tighter rules and sometimes higher rates or fees. Many buyers are better served by full-doc with clean records. If your ABN is under 12 months, show strong current performance with BAS and contracts. Some lenders consider this case-by-case.
Optimise your paperwork pack
Turn your documents into a clean, consistent pack. Think of it as a product brochure for your business income.
- Tax returns and notices of assessment: last one or two years, matching details throughout.
- Business financials: profit and loss, balance sheet, and notes that explain add-backs.
- BAS summaries: highlight GST turnover trends by quarter.
- Bank statements: show cash flow patterns and invoice references.
Cash income: keep it clean
Cash jobs that do not reach the bank may reduce assessed income. Deposit your sales, invoice consistently, and avoid mixed personal and business spending on the same account. This helps lenders model your income correctly.
- Separate business and personal accounts.
- Use invoice numbers that match bank statement references.
- Record cash sales and bank the funds promptly.
Contracts and pipeline proof
Future income is stronger when you can show signed agreements and recurring subscriptions. A short schedule of key clients, contract terms, and renewal dates gives lenders confidence that this year will look like last year or better.
- List top clients with start dates and billing cycles.
- Attach letters of engagement where available.
- Point out retainers or subscription revenue.
Checklist: documents to assemble
- Latest tax returns and notices of assessment
- Year-to-date BAS and business bank statements
- Financials with clear add-backs
- Client contracts or letters of engagement
What this means for Buyers
- Full-doc usually improves outcomes if your records are tidy.
- Cash-only work can cut assessed income.
- Contracts and retainers help validate recent growth.
Quick Q&A
Q: Do all lenders accept the same add-backs?
A: No. Each lender has rules. Only include add-backs you can evidence.
Q: Is an ABN under 12 months a deal breaker?
A: Not always. Strong BAS and contracts can help in case-by-case assessments.
Related reading: Plan your numbers with tools
Boosting Borrowing Capacity as a Sole Trader
Borrowing capacity is shaped by income, living costs, debts, and buffers applied by the lender. As a self-employed borrower, you can influence several inputs well before you apply. The aim is to arrive with clean accounts, lean debts, and a savings pattern that proves you can handle repayments plus a cushion.
Look at credit cards and other limits. Lenders often assess the limit, not just the balance. Dropping a $15,000 limit to $5,000 can improve the outcome. Review personal loans, car finance, and buy now pay later arrangements. Each one pulls capacity down. Tidy them up or pay them down where possible.
Worked example: two buyers each show $85,000 assessable income. Buyer A carries a $15,000 credit card limit and a $12,000 personal loan. Buyer B has a $5,000 limit and no personal loan. On the same test rate, Buyer B can often borrow tens of thousands more. This is a quick lever that many business owners can pull early.
Savings patterns matter too. Regular buffers show discipline and reduce credit risk. Even if you plan a 20% deposit, keep three months of expenses untouched. Lenders like to see that you can handle a surprise month without stress.
Trim high-impact debts
Cutting unused limits is a fast way to improve capacity. Do it a month or two before you apply so the change appears on statements and credit files.
- Reduce card limits you do not need.
- Consolidate small debts where it simplifies cash flow.
- Close dormant accounts that show as open liabilities.
Stabilise expenses and savings
Regular saving shows resilience. If income is seasonal, time your application after a strong quarter and keep your living costs steady for several months.
- Automate a weekly transfer to savings.
- Hold a buffer equal to three months of expenses.
- Avoid new liabilities in the 90 days before applying.
Tune your income story
If this year is stronger than last, use BAS and bank statements to show the trend. Explain big jumps with contracts or new products. Consistency across documents matters more than big numbers on one page.
- Include a simple one-pager on business model and margins.
- Show month-by-month turnover for the last 6–12 months.
- Call out recurring revenue with brief notes.
Checklist: levers that move capacity
- Reduce unused credit limits and tidy small debts
- Show a stable savings pattern
- Explain income growth with evidence
- Time your application after a strong quarter
What this means for Current borrowers
- Small clean-ups can create room to refinance later.
- Lower limits and fewer debts improve options.
- Seasonal timing can lift capacity without changing income.
Quick Q&A
Q: Do lenders use my actual card balance?
A: Many use the limit for assessment. Reducing limits can help.
Q: Are seasonal incomes a problem?
A: Not if you show a steady overall trend and keep a sensible buffer.
Pre-Approval and Application Timeline
A mapped timeline keeps your purchase on track. Plan backwards from your target auction or private sale. Allow time to gather documents, run a borrowing capacity check, and obtain pre-approval. Keep your financial position steady from pre-approval to settlement.
Week 1 to 2: gather financials, BAS, bank statements, and contracts. Week 3: run a capacity check and choose a lender policy that matches your scenario. Week 4 to 5: submit for pre-approval. Many lenders respond within 5 to 10 business days if documents are clean. Then keep your accounts stable until you buy.
Worked example: you target a $750,000 property with a 15% deposit. That is $112,500 plus costs. Assume a 6.3% rate over 30 years on a $637,500 loan: indicative repayments are around $3,942 per month. If your pre-approval is based on stable BAS and bank statements, do not add new liabilities or change structures until after settlement.
Valuation paths vary. Desktop valuations are fast if comparable sales support your purchase price. If your business draws income from a unique niche, full valuations and more questions may follow. Keep records handy so you can respond quickly.
Timeline with milestones
- Week 1: document pack checklist and ABN verification.
- Week 2: capacity check and policy fit review.
- Weeks 3–4: pre-approval lodgement and follow-ups.
- Week 5+: property search and valuation path.
What this means for Buyers
- Clear milestones reduce delays at auction time.
- Stable finances after pre-approval protect your position.
- Fast valuations need clean, comparable sales evidence.
Quick Q&A
Q: How long does pre-approval last?
A: Many are valid for around 90 days, subject to policy and clean finances.
Q: Can I switch lenders mid-search?
A: You can, but it restarts checks. Keep your pack ready to move quickly.
Disclaimer: The opinions expressed in this article are strictly for general informational and entertainment purposes only and should not be taken as financial advice or recommendations.
Written By
The Craggle Team