If you are self-employed, obtaining a mortgage may be more difficult because you will be required to illustrate that you have a consistent source of income. However, securing a mortgage as a self-employed person is not impossible. Many of your typically employed relatives and friends’ mortgage opportunities will be similar to yours, especially if you have very strong or outstanding credit and can demonstrate a stable cash flow.
A mortgage is not made more difficult to obtain for self–employed individuals because of any unique requirements. You will be assessed on the same criteria as other borrowers when it comes to background, liabilities, deposits, and earnings. The component that can be tricky is proving your means of income. You may be required to provide more paperwork than you would as a corporate employee to prove your income stream. However, as long as you meet loan requirements and can demonstrate a stable and consistent source of income, being self–employed should not prevent you from purchasing a property or refinancing.
FACTORS THAT LENDERS ARE LOOKING FOR:
- Stability of cash flows.
- Location and nature of your business/self-employment.
- Financial capabilities of your business/self-employment.
- Stability and reliability of your business/self-employment to create adequate revenue in the foreseeable future.
HOW TO INCREASE YOUR APPROVAL RATE:
- BE ON TRACK – A lender will be less likely to turn down your application if you can demonstrate that you understand how to manage the self-employment market and have a successful record of doing so. You must have a minimum of two years of experience as a self-employed individual to have better chances of approved loans. The greater the length of time, the better, as it demonstrates that your revenue is stable.
- POSITIVE CREDIT HISTORY – When lenders examine your credit history, they are looking for clues as to your capacity to pay your loans. Credit history, as reported in your credit file, does not consider the amount of money you earn. In contrast to your debt-to-income ratio, the higher your credit rating, the more beneficial your position will be when applying for a mortgage.
- EQUITY – The greater the amount of equity a borrower has in their property, the less probable it is that they will make a clean break from it through periods of financial difficulty. If a borrower invests a significant amount of money in the purchase upfront, a bank will view them as less of a danger.
- SETTLE CONSUMER LIABILITIES – The fewer monthly loan payments you have when you begin the mortgage application process, the smoother it is for you to fulfill your monthly mortgage payments on time. If you settle off your credit cards and vehicle loans, you may even be able to qualify for a more significant line of credit because you’ll have greater cash flow in your account.
- PROVIDE SUPPORTING DOCUMENTS – It will boost your chances of getting approved for a loan if you are willing and prepared to fully record your income through prior years’ tax filings, cash flow, accounting records, and other financial statements.
COMMON DOCUMENTS REQUIRED BY LENDERS:
- Detailed List of Debts and Corresponding Payments Schedules
- Account Statements
- Asset Record (Bank Accounts, Investments, etc.)
- Other Source of Funds/Income (if there is any)
- Business or Self-Employment Documents
Finding Your Lender
Before applying for a self-employed loan or any other type of house mortgage, there are several considerations to evaluate. Having a knowledgeable realtor on your side may immensely benefit you in becoming more aware of your options and being more directed as you decide whether or not to apply for a house loan. Our team of skilled specialists can supply you with high-quality services that will undoubtedly assist you in determining the most excellent possibilities that are currently available to you.
Advantages of Self-Employed Loans
- New loan type perfect for freelancers and self-employed individuals
- Provides business owners easy access to capital without having to sell shares
- Easier to process than traditional business loans