With the right lender, getting a mortgage loan is a piece of cake, however, there is a particular group of people who are not considered ideal borrowers; self-employed people. Your chances of securing a loan become much easier when you are employed and have a regular source of income as most lenders are concerned about a steady flow of money. This often leads to complications when it comes to getting mortgage loans.
Self-employed mortgage loans are difficult to get; apart from the cash flow problem, such loans involve a lot of paperwork, and lenders might be reluctant to put in the effort. However, you can make your economic profile more appealing to lenders even if you are self-employed. Here are 5 things every self-employed person seeking a loan must be aware of.
Higher Rates of Interest:
Self-employed borrowers might be required to pay higher interest rates by some banks and lenders because of the unavailability of a verifiable, documented source of income. To circumvent this, you can make your credit profile more attractive by keeping your credit score high, offering good down payments, etc. While most banks and lenders charge higher rates of interest, having a solid credit score can turn the tide in your favor.
A Self-Employment History:
If you can prove that you have sustained yourself through self-employment, with steady cash inflow, lenders will be more willing to help you. A history of successful self-employment can be the stepping stone towards getting a mortgage loan. Some lenders understand that self-employed people have more than one client at a time and unlike conventionally employed people, will not lose other sources of income if one dries off. However, be ready with your self-employment history if you are seeking a mortgage loan.
Banks and lenders are very generous about loans if you can provide the right documentation. If you have a meticulous archive of your income, taxes, balance sheets, and debts in recent years, lenders will favor you because of your financially responsible actions and history.
No Documentation Loans:
No documentation loans can be a good option for you if your tax returns or income history is ambiguous. While these will help you bypass the documentation process, the interest on such mortgage loans is generally higher than regular mortgage loans. Getting a joint mortgage with a conventionally employed acquaintance can also help.
If you have any consumer debts, it would be wise to pay them off before applying for a mortgage loan. Less debt means access to higher amounts in mortgage loans. So pay your car loan, your credit card bill, and any other debt that you can manage, before applying for a mortgage loan.
Although getting a loan is a straightforward process, some banks and lenders make it very difficult for you to avail of the benefits of the loan. You should consider established names like Blake Mortgage if you want the loan process to be smoother and easier.