Getting a mortgage isn’t always easy, and getting a mortgage for self-employed people can be even more difficult. If you are self employed and have decided to try and buy a home, the first thing you might want to think about is how to make yourself look good to lenders so they will want to give you a mortgage. How do you do that? There are a number of factors that will make a lender consider you for a loan.
Improve your loan chances
Improve your credit score. Any lender will look at you more favorably if your credit score is as high as possible. A higher credit score will also allow to qualify for lower interest rates.
Have a large down payment. The lender will see you as less of a risk if you have put more equity into your home, since you are less likely to walk away from it if things go wrong.
Have plenty of cash reserves. Showing the bank you have money in reserve means that you will be able to make your mortgage payments even if your business slumps.
Pay off all your other debt. Paying off your credit cards and car loans shows the lender that you will have more money for mortgage payments. You may even qualify for a higher loan amount.
Show a successful record of self-employment. Mortgage lenders will be more willing to take a chance on you if you have been successfully self-employed for some time. The average time to show the bank is two years, but even if you have had your business for less than that, you should go ahead and apply for a loan during times of low interest rates.
Document your income. Be able to show the lender documents proving your income, such as previous years’ tax returns, profit and loss statements and balance sheets. Such documentation will increase your chances for a mortgage.
Don’t think that just because you’re self-employed you can’t get a mortgage. You may have to do a little more paperwork, but in the long run, it will be worth it.