Self-employed individuals may face a harder time securing a mortgage loan than others. Lenders may be reluctant to give you a loan, as they may fear you may not make enough revenue to pay off your loan each month whereas other may not want to deal with the paperwork involved in providing a loan to self-employed individuals.
What Should You Expect?
If you are self-employed, lenders may turn the other cheek because according to them, you are not an ideal candidate for a loan. They will offer you high interest rates, which will force you to shop around for other lenders offering a lower interest rate.
Another problem you may run into is if you have used several of your business expenses to decrease your taxable income. When lenders see this, they will question your ability to earn sufficient money to buy a home. Lastly, lenders look for loan to value ratio, which means that you will have to put down a large down payment.
How Do You Make Yourself an Attractive Candidate in the Eyes of the Lender?
To increase your chances of securing a mortgage loan to buy a house, you will need to the following things:
- Maxing Out Your Credit Score
This one should be obvious. Lenders will be more susceptible to consider giving a loan to people with a high credit score than those with low scores. A high credit score indicates low interest rates if they approve your mortgage loans.
- Put Down a Large Down Payment
Putting down a large down payment increases the equity of your home. The lender will not see you as a risk when they know you intend on purchasing the home and that you will not walk away from it in times of financial hardship.
- Have an Emergency Fund
An emergency fund, showing large sums of moneys, provides the lender with the security that you will continue to make your monthly mortgage payments even if your business closes down.
- Repay Your Entire Debt
The lender is more likely to approve your mortgage application if they see you have paid all of your debts. You should try to repay your car loans, credit debts, and any other loan you have taken out in order to increase your chances of securing a loan.
- Show Them You Are an Experienced Entrepreneur
If you want to be successful at obtaining a mortgage loan, you need to show your lender that you have a minimum of two years experience in running a business. Conversely, if the interest rates are low, you need to apply for a mortgage loan even if you do not have a long history of being self-employed.
- Provide Business Documentation
You need to provide the lender with business documentations such as last year’s tax returns, balance sheets, and profit and loss statements to increase your probability of securing a mortgage loan.
As long as a person maintains a good credit history, it should be impossible for them to obtain a loan.…