Many self-employed individuals know how hard it is to apply for a home loan. If you are your own boss, it is just normal that lenders and brokers will consider you as high-risk. Apart from the issue of job stability, some lenders are wary of approving an application if you don’t receive a regular paycheck.
While it is true that it is challenging to get a home loan, it is not impossible. Mortgage rate providers note that with advanced planning and right preparation, you can get a loan and have your own home.
Lower Than Real Income
When applying for a loan, you need to provide your tax return for the last two years. This, however, does not always reflect your real income. This is because loan underwriters usually view deducted tax expenses. They see a lower figure of what you actually receive, which could lower the amount you can qualify for or even rejection.
Before purchasing a home, lenders recommended preparing much longer than typical buyers. This means arranging your finances, so your business will mix with your own funds and savings. You can also provide lending companies solid references of people or businesses who can guarantee your financial stability.
More Down Payment
Many self-employed buyers win the approval of lending companies by putting more money for down payment. Mortgage approval will be higher if you can pay at least 20% of the down payment. This is better if you can put more down. It is also a good idea to look for properties that do carry extra fees for things like maintenance.
Good Credit Score
A strong credit score is important when applying for mortgage, but much more for self-employed individuals. This reflects how you manage your finances and how you handle bills and debt payments. A solid score will make you an ideal home loan candidate, so it is best to get it back on track if yours not stellar.
If you are considering purchasing a home, talk to a reliable lender to know your options and the necessary preparations. Note that is possible to get a home, but it is best that you understand the requirements and application process to avoid surprises.