The housing and financial crisis that we’re slowly recovering from affected everyone. Even self-employed and business owners are experiencing the difficulty that almost everyone is dealing with right now. They too are also having a hard time getting a self employed home loan.
Applying for a mortgage is necessary if you are trying to buy your dream home but not paying cash for it (which is about 99% of us). However, deciding to apply for a mortgage is the easy part. It is a different story when it comes to getting approved. In any case, you need to know that there are key factors that your mortgage approval depends on. So, if you want to increase your chances of getting approved, you need to consider these factors well. What are these?
How To Get Approved For A Self Employed Home Loan
Tips for Making Yourself an Attractive Candidate for a Mortgage
The factors for getting approved for a self employed home loan or mortgage are somewhat different from getting approved for a 1099 mortgage, but the general principles are still the same.
Tip 1: High Credit Score
Just like with applying for any type of loan, having a good credit score can easily improve your chances of getting approved. The same case applies with applying for a mortgage, especially if you have a high credit score. With a high credit score, you will benefit from qualifying for interest rates that are lower once you get approved.
Tip 2: Your Income
There are plenty of self-employed people who reduce their income by deducting their business expenses. These people do this for tax purposes. Keep in mind that the income you stated on your mortgage loan will be the same one showing on your tax returns. This means that if your income is low, the mortgage you will qualify for is also low.
No matter how much you earned the previous year, your income will still remain as the average of your 2 most current tax returns. In the end, what you have earned the previous year will still not matter to your lender.
Tip 3: Provide a Big Amount of Down Payment
If you want to qualify for a self employed home loan, remember that a higher equity in your home can make a big difference with the end result. From a banks point of view, this means that you are less likely to walk away when you encounter a financial strain. Hence, you will be much less of a risk in their eyes.
Tip 4: Enough Cash Reserves
Aside from a big amount of down payment, having large enough cash reserves you can use for emergency purposes will make you a safe candidate for a mortgage. This is because the bank knows that even if your business goes through a financial crisis, you will still be able to pay your monthly mortgage payments.
Tip 5: Pay All Your Debt
For banks, fewer debt payments to be paid monthly means it will be easier for you to make the payments. Once you pay off your car loans and credit cards, the better chance you have to qualify for a much higher home loan.
Tip 6: Established Self-Employment Track Record
Lenders will become more willing to approve your self employed mortgage application if you know how to play and win the self employment game. There is a better chance of you getting approved if you have at least a two-year history of being self employed in addition to all the tips I’ve mentioned already.
Everything I’ve talked about so far all comes from the real life experiences we’ve seen. No matter if you’re self employed or been an employee at a company, we have lenders that specialize in getting you approved when other lenders have said “NO”. Do not give up on your dream of owning a home. We here at Home Loans For All will make sure to get you with the right lender that is best equipped for your own unique situation. Compare mortgage rates and mortgage lenders and get pre-approved today.