Buying a home is a significant milestone, but for self-employed individuals like Renae, the journey can be particularly challenging. Renae, a 29-year-old freelance graphic designer, approached Zenith for assistance in securing financing for her first home.
Despite her strong earnings and financial discipline, her short-term self-employed status posed unique obstacles. This case study explores how we helped Renae overcome these challenges and achieve her dream of homeownership.
The Challenge
Renae’s situation highlighted several common hurdles faced by self-employed borrowers:
- Income Variability: As a freelancer, Renae’s income fluctuated month-to-month based on client projects, making it difficult for lenders to assess her financial stability.
- Taxable Income vs. Gross Earnings: Like many self-employed individuals, Renae had deductions that reduced her taxable income, negatively impacting her borrowing capacity.
- Documentation Requirements: Lenders required extensive documentation to verify her income and business viability, which added complexity to the application process.
- Limited Deposit: While Renae had saved $80,000 for a deposit, she was concerned it might not be sufficient to secure the loan amount needed for her desired property in Melbourne’s competitive market.
Our Approach
At Zenith, we specialise in navigating the complexities of self-employed home loans. To assist Renae, we implemented a tailored strategy:
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Comprehensive Financial Assessment
- Reviewed Renae’s business financials, including tax returns, profit and loss statements, and bank account summaries.
- Analysed her income patterns over the past two years to demonstrate consistency despite fluctuations.
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Optimizing Income Presentation
- Worked closely with Renae’s accountant to identify “add-backs” such as depreciation and non-essential business expenses that could be included in her serviceability assessment.
- Ensured her declared income accurately reflected her earning potential without compromising tax compliance.
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Targeting the Right Lenders
- Identified lenders with flexible policies for self-employed applicants, especially ones that take a common-sense approach.
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Enhancing Borrowing Capacity
- Suggested Renae reduce her credit card limits and pay off minor debts to improve her debt-to-income ratio.
- Included projected rental income from a granny flat she planned to lease out in the new property.
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Streamlining Documentation
- Assisted Renae in preparing all necessary documents, including a detailed letter from her accountant explaining the sustainability of her business and income sources.
The Process
Throughout the process, we provided Renae with step-by-step guidance:
- Obtained pre-approval so she could confidently begin house-hunting.
- Connected her with a buyer’s agent specialising in properties within her budget and preferred location.
- Coordinated with the lender to ensure timely approval once she found a property that met her needs.
The Outcome
Thanks to our strategic approach:
- Renae secured a loan of $520,000, more than she initially thought possible, enabling her to purchase a charming two-bedroom house in Melbourne’s outer suburbs.
- By maximising her usable income and choosing the right lender, we helped Renae secure favourable loan terms with a competitive interest rate.
- She moved into her new home within three months of starting the process and expressed gratitude for the clarity and support provided by Zenith.
Conclusion
Renae’s success story underscores the importance of specialised financial advice for self-employed individuals. At Zenith, we understand the unique challenges faced by freelancers and business owners. If you’re self-employed and looking to buy your first home or upgrade your current one, reach out to us today for expert guidance tailored to your needs.
