Mortgage Loans For The Self-employed: Making Home Purchase Possible

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.

Do You Know How To Raise Cash For Financing A Business Purchase Acquisition?

When financing a business purchase acquisition it kind of comes, fortunately or otherwise, to the fact that ' size counts '! . So the cash you need will directly relate to the size of the business you are financing, as well as the asset quality. Naturally how the company you are purchasing and raising cash for is doing play a key element, as often less cash is required and the focus is on financing remaining assets.

So a solid rule of thumb to keep in mind is simply that the amount of cash and ' finance power ' you need is very directly related to your targets situation on profitability. In other words a lot less real cash is required if a company is not profitable or barely breaking even. That certainly makes the job easier, right?In talking to clients about financing a business purchase we often feel they are focusing solely on the purchase, and not on the on going capital and cash flow needs of your newly acquired business.

We also have to consider the fact that raising cash for a business might often be more feasible if you have a strategic partner or other equity investor. That unfortunately will dilute your equity position but might be realistically the best course of action. And it does certainly allow you to purchase and fund a business with less ' monetary' contribution to the deal.In the case of larger transactions Canadian business people might well look to a private equity partner in the deal.

Their assistance in helping you complete an equity investment, as well as their experience in any specific industry is of course a valuable consideration. And to sum up the whole issue of getting either a strategic or operating partner or private equity group we can simply say that often times this might well add credibility and realism to your offer in the eyes of the seller.Bank financing in Canada is available to finance business acquisitions. You or your Canadian business financing partner needs to address the following issues at this point:A concise overview of how you will run the business - i.e. management depth, experience, etcYou need to ensure the industry your business is in is ' in favor ' when it comes to a bank appetite.

Your business plan and projections have to be realistic relative to cash and working capital resources re operations and growthIn a perfect world - and we know it's not! You want to be in a position to demonstrate sales growth, profits, and a balance sheet that hopefully won't have a debt/ equity ratio of 3:1 as an example.

And your assets such as inventory and receivables should demonstrate borrowing power quality.Other ways to finance your business purchase include asset based lending, bridge loans, use of sale leasebacks, and even the government SBL loan if the business has under 5 Million in revenue.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor when it comes to a capital raise for a business purchase acquisition in Canada.