Their income, liabilities, lifestyle, and job, including their employment type all play a part. At the end of the day, the lender needs to work out the average income that could be sustained throughout the duration of the loan.
Proof of income requirements
There are different proof of income requirements applicable depending on whether you are employed or own your own business. Depending on the lender’s policies, employed borrowers are typically required to show at least two out of the three most recent consecutive payslips as proof of income, plus three months worth of bank statements showing salary deposits.
On the other hand, self-employed applicants have different requirements and are instead asked to show either:
i.) Tax returns and ATO notice of assessments from the last two financial years.
Or
ii.) Profit and loss statements, balance sheets, and other financial statements from the last two financial years.
Employed borrowers are generally considered to be lower risk applicants compared to self-employed because of the stable and predictable income to support the loan if they have been in their role for at least six months and passed probation. Conversely, self-employed individuals, whether they are sole traders and company directors, have to prove profitability for the entire business over a longer period.
Keep in mind that there are alternate lending products that could suit self-employed applicants that don’t have their financials up to date. There are lo doc offerings where less documentation is required from the business if accompanied with a signed income declaration from an accountant on their behalf.
How long do I need to be in my job to get a loan?
Lenders use duration in an applicant’s current job or role as an indicator for job security. As a general rule of thumb, lenders require full-time or part-time employees to have stayed in their job for at least three to six months, and casual employees to remain in a job for at least six to twelve months. Important considerations include whether or not the applicant is within a probation period, whether they have changed jobs or industry, employment history, varying job types, but these are all subject to variations between lender policies.
Lending comes at a case-by-case basis so do not hesitate to contact us at 13 WLTH or hello@wlth.com to find out how much you can borrow.
Any advice provided is general in nature and should be considered in line with your financial situation, needs and objectives.
