Getting a mortgage as an employee is usually easier than when you are self-employed. You don’t have to keep going back to your cubicle to be a candidate for a mortgage application. Some lenders may be worried that being self-employed means you don’t earn a steady income to cover your monthly payments. Others don’t just have the time to go through a rigorous documentation process to provide a mortgage for self-employed people. Not to worry, if you find yourself being self-employed, there are several steps for you to take to make yourself suitable for a mortgage loan, which is one of the reasons you need the assistant of Coventry accountants.
Challenges Faced By Self Employed When Seeking Mortgage
The majority of lenders don’t see self-employed people as the candidate to give loans. An employee can easily be given a loan because he is seen as being creditworthy due to his easily verifiable and steady income. Self-employed borrowers will be required to do available paperwork to record their income against employees who can provide their income details with ease. Furthermore, another challenge faced by self-employed who intend to borrow is that they run many business expenses, which reduces taxable income, forcing lenders to think if the self-employed borrower makes enough money to buy a home. Finally, the borrower will need to make a good impression by making a larger down payment.
Steps Towards Seeking Mortgage As A Self Employed
Self-employed who are sure that they make the payment should follow the under listed steps to improving your chances of getting a loan:
- Establish A Self-employment Track Record
If you are bold and confident that you want to play the game of being self-employed and win, lenders will be willing to take a bet on you. Your years of experience as a self-employed must be at least two years or above. The more the number increases, the better your chances of getting a mortgage loan, as it shows how stable your income can be.
- Check Your Credit Score
In every situation, for a borrower to get a loan approved, creditworthiness is always in question. The higher the credit score, the higher the chances of getting a loan alongside a low-interest rate.
- Make Large Down Payment
For a borrower to be considered for a loan, the equity in his possession must be higher. The borrower is more likely to stay back during times of financial strain. A bank will see the borrower as less of a risk if they put a lot of cash into the purchase up front.
- Cash Reserves
In addition to making large down payments, having a significant amount of money in an emergency fund shows lenders that even if the business takes a downturn, the borrower will still payback.
- Ensure Your Debt Are Completely Paid Off
It is better to have fewer debts to settle before going into the mortgage process. Having a lesser debt to settle makes the entire process easier and better for you to make your monthly mortgage payment.
Having a proper document that shows your income through previous tax returns, profit and loss statements, balance sheets, and the likes will be an added advantage for you to qualify for a mortgage loan.
Of course, self-employed individuals are already used to working extra hard. As self-employed, you should endeavor to follow the steps listed above if they want to be considered for a mortgage loan. With the little knowledge already gained and patience, they can also find other alternatives to qualify for a mortgage.