Others have the impression that if you are self-employed, it is hard to get self-employed mortgage loans. Do not let this worry you! Getting a mortgage loan while you are self-employed is also possible as long as you are organized in managing your finances.
If you run your own business and you want to buy a home, you also have to fill out the same forms and go through the verification process just like everyone else. But what is the difference when getting self-employed mortgage loans and loans?
When you are an employee, the lenders go to your employer to check your income and how you are going about it. When you are working for yourself, keeping track of your income is something that you have been doing. However, it is good to be prepared whenever you plan to get a mortgage loan.
How to get approved on self-employed mortgage loans?
You have to be a very attractive candidate so that you can get approved. If you are confident that you can make the monthly payments, you just need some improvements to increase your chances of getting a loan.
Credit Score and History
First, you have to know where you stand in terms of your credit score. Check your credit report because lenders check this always. There are several ways to improve your credit score and some of these are correction of your credit record, paying your bills on time and full, and not going more than 30% of your credit limit on all your accounts.
DTI (Debt-to-income) Ratio
If you qualify based on credit score and history, then the next thing to check is your DTI ratio. This will increase your chances of getting approved based on what the lenders see. To lower your DTI, you have to pay off debts or consolidate your debts at lower rates.
Business vs. Personal Assets
Usually, self-employed applicants have the personal and business assets mixed up. If you can keep them separate, it will also be helpful. Assess personal and business finances and keep them separate. Just make sure that the sources of income are documented.
Offering a higher downpayment to the lender will put you at less risk of running away when there are financial difficulties. So if you offer to put more cash upfront, some lenders will consider you more.
Having cash reserves or an emergency fund will ensure that you can make monthly payments in times of business crisis.
Getting ready with documentation
The mortgage lender will ask for some documents to assess your application. Submitting and being ready with these documents will enable you to increase your chances. The following are some of the documents that you may need to prepare:
- Bank statements
- Asset list
- List of debts
- Sources of income
- Proof of business
Getting a mortgage as self-employed is similar to how a regular employee does it. You just have to present business income documents to prove that you have the capacity. blakemortgage.com is one of the leading mortgage lenders in the Phoenix Metropolitan area since 2002. They can offer customized mortgage solutions to clients. Their extensive network can give the best solution for your financing needs.