Everyone wants to buy a cozy home to live in, and everyone has the right too. But unfortunately what home can be bought depends on the mortgage that is deemed affordable. For many people with their own businesses, qualifying for a mortgage is a challenge, but mortgage loans for the self-employed are available to improve their chances.
The reason that the self-employed find it harder to secure mortgage loan approval is the lack of job security. A business can go to the wall, especially in these difficult financial times. But an employee does not have to worry about the same things, and are able to rely on their salaries more.
By providing the required documentation, it is possible to get the mortgage loan needed.
Criteria to Qualify
Because of the large percentage of the workforce that is self-employed, there are plenty of options open to that niche market. However, there is still a need to meet the necessary criteria to qualify for a mortgage loan for the self-employed. The criteria inevitably involves furnishing proof that the applicant has a business and that everything with it is fine.
The range of documentation is not that wide, but it is enough to ensure that everything is above board. Typical documents needed to secure mortgage loan approval include a business license, the business credit report and trading tax returns. With this information, lenders are able to ascertain just how secure the business is, and the level of debt the applicant already has on his plate.
Other proof required is that the income is reliable, that the applicant has been self-employed for at least 3 years, has no recent bankruptcies or foreclosures in the credit report, and proof of a down payment. Once these are confirmed, the chances of securing a mortgage loan are improved considerably.
Knowing Your Limit
Budgeting is hugely important when it comes to mortgage loans for the self-employed. And so it is a good idea that your limit is known before the application is submitted. The first step is to find out your credit score, and to check what effect it will have on mortgage terms like interest to be charged and the percentage purchasing price offered.
Efforts to secure mortgage loan approval may be extensive when going into this level of detail, however, the effort is certainly worth it. If the bad credit score is between 620 and 650, it will probably mean getting 65% the purchasing price. This means a down payment of 35%, or a second mortgage of that amount, is needed to push the purchase through.
Knowing what terms are around the corner allows the applicant time to put things in order before making the mortgage loan application. For example, improving the credit score to 680 could see 75% of the purchase price provided, or an excellent 700 ensuring an 90% financing deal.
Finding A Lender
Different lenders offer different deals, so finding a lender that offers a mortgage loan for the self-employed that has low interest rates and good repayment terms can require some searching.
Efforts to secure mortgage loan approval generally involve making concessions, but that is not to say that any terms should be accepted. A basic decisions is to choose between fixed rate and variable rate mortgages. A good lender will be able to advise properly on which is the most suitable option given your circumstances.
It is also worth considering options like a shorter term (15 years), or a mixed variable and fixed rate deal. Whatever the options, however, make sure it fits your mortgage loan budget, otherwise it could spell financial disaster.