I’m Self Employed

The latest trend has found more people are running their own business from home to enjoy flexible working hours.  There are many different self employed trades that can range from white collar occupations such as accountants, lawyers, financial planners, mortgage brokers, to blue collar occupations such as carpenters, plumbers, electricians just to name a few.

Whatever the field of occupation, there is no doubt that there is a great potential to earn huge profits.   However, if you are self employed,you may be denied a traditional home loan due to lack of paperwork to verify your income.

The alternative is to apply for a lo documentation home loan (often called lo doc loans).  Lo Doc home loans are specifically designed for self employed people and other non-conforming borrowers.

Range of Products

Many lenders offer standard and premium lo-documentation products with the choice of fixed or variable interest rates.  This means that self employed people can choose between a basic loan with a low interest rate, a loan with more transactional features and a higher interest rate or a line of credit loan with all the bells and whistles.

To qualify for a lo-document loan, many lenders require you to self-certify your income and demonstrate a clean credit history.

Pros and Cons

With less documentation required to prepare, obtaining a lo doc loan is faster due to the streamlined application process and even though the interest rates may be higher than a standard loan, you may be able to transfer to a full-doc loan at a lower interest rate once you can provide the traditional forms of income verification.

However, there may be limits as to how much you can borrow (ranges from 60 to 80 per cent of the value of the property).  You may also have to pay lenders mortgage insurance, adding to the cost of the loan.