Tips To Apply For A Mortgage When You’re Self-Employed
The delight of being self-employed is beyond explanation. You don’t need to worry about office timings. You can plan how much you want to work. There are no compulsions to complete tasks. You don’t actually worry about reporting your work to your boss as you are the boss. The perks of being an entrepreneur are contagious. People aspire to become their own boss.
Well, every coin has two sides. Entrepreneurs don’t report anyone daily yet they need to constantly pay attention to their goals. They work hard to make their space in the market. After all this, the financial uncertainty keeps them in the dilemma. The irregular income patterns become hurdle in their mortgage approvals.
Banks & Mortgage Institutions label self-employed clients as a risky investment. They feel most of the self-employed people fail to make the monthly payment. Entrepreneurs’ may make good money one month and face losses in the coming months. It is difficult to document their income proofs. This unpredictable nature of finances keep the lenders skeptical about their return on investments. Also, the principal amount is at high risk.
With so many hurdles in between, getting your desired mortgage plan is a bit dicey. There are a few ways you can get a mortgage plan approved for your home.
TIPS TO GET MORTGAGE FOR HOME
Check your Income
Applying for a home loan is more than just an application form. Check your financial status before applying. The lenders mostly ask for personal income tax returns for recent years, business income tax returns ( if your business is partnership or cooperation), business license or a CPA statement is mandatory as proof of your entrepreneurship for a minimum of two financial years. The income evaluation often done by the lender becomes the deciding factor of mortgage approval/denial.
Improve Credit Score
Credit scores for self-employed people plays a very crucial role in mortgage approval. It is a score of trust & reliability. Entrepreneurs need a good credit score more than anyone else. If your previous business failed and you defaulted to pay your loan, a lender is less likely to trust you. Before applying for your mortgage, make sure you have a good credit score. Pay all your debts and make sure no outstanding amount hampers your credit score. Once the lender observes that you have a good credit score, your chances to get mortgage increases.
Be ready for a big down payment
As a self- employed person, you should remain ready to pay higher down payment than others. Banks/ lenders want entrepreneurs to pay a percentage of the amount as compared to what people pay under normal circumstances. For instance, an employed person may need to pay the 5 to 10% as the down payment. However, entrepreneurs are often expected to pay around 15-20% of the amount in the down payment. More the down payment, the less financial risk for the lenders.
Get your documents sorted
For any finance-related deal, you need to submit lots of documents. Similarly, a lender may ask for many proofs, documents before giving you the money. These documents can include
– Notice of Assessments ( related to Income Tax Return)
– CRA Statement of Account
– Business-related registration papers
– Complete details of your business/personal assets.
Hire a good Mortgage Lender
Everyone knows their work best. No matter how ready you are with all documents & formalities, a single mistake can lead to a complete mortgage dismissal. Who wants to take that much risk being a self-employed candidate. You should approach your financial advisors nearby. For instance, if you live in Massachusetts, team up with Massachusetts mortgage companies. The mortgage lenders can crack the best deal for you.
The journey to get your loan approved is not easy. In fact, it is more tedious for the self-employed candidates. Drew Mortgage understands there is a huge gap between applying and approval of loans for entrepreneurs. We are one of the leading Massachusetts mortgage companies. Our loan officers are always here to help you & bridge the gap. Get in touch with us for the best and comparatively quick home mortgage approvals.
Share your queries with us and we shall get back to you soon!