Do you work for yourself and have difficulty getting approved to get a loan for your home? From a lender’s point of view, a self-employed person presents a higher risk than someone else, but don’t let this stop you. To secure a home loan, you must be prepared. Here are some tips to help you get started.
Order your accounts
If you’re self-employed and are looking to apply for a mortgage, it is important that you plan ahead. Your accountant should be consulted about plans to purchase a property.
For a mortgage to be approved, you must prove your earnings over the past two years. In addition to this, lenders may also require proof that there has been a steady income. Remember that lenders only accept income from tax-paying sources. A mortgage provider will typically look at the following documents for self-employed mortgages:
- Two years’ worth of accounts
- Returns and calculations for tax over two years
- An credit report/history
- Note of continuous work (including the reasons behind any income changes or drops)
You can use an accountant to prepare your financial statements or do it yourself. Wave, an accounting software platform allows you to keep your documents and electronic records organized. This will make it easy for mortgage brokers to find the information they need quickly.
Find a good broker
There is a level of anxiety that everyone feels when they apply for a home loan. This includes whether or not the mortgage will be approved. This will be even more stressful if you’re self-employed. For this reason, getting expert help is crucial, and getting the help of a good mortgage broker means you can get advice on how to improve your chances of getting approval.
The mortgage broker will guide you throughout the entire process from helping you to gather the necessary documents to finding the best lender to suit your needs. For example, with Trussle’s new MIP service, you can quickly check if you are likely to be accepted but avoid being rejected or having your credit report negatively impacted. Also, remember that you can get the same interest rates for employed lenders. A mortgage broker will assist you in finding the best rate.
Your credit score can be improved
For anyone who is applying for loans, it’s important that you have your finances under control. However, this applies more to self-employed entrepreneurs as they are considered higher risk. It is advisable to check your credit score, with Experian for example, and make any necessary changes to improve your credit rating well before any mortgage application. When possible, you should close any small loans or credit cards. The banks will be looking for evidence that you are able to pay off your debts in a consistent manner.
It doesn’t mean that you can’t get a mortgage if your business is self-employed. You will need to have good financial records, an income and sufficient deposit.
Entrepreneurship Life published the article Securing A Home Loan If You Are Self-Employed.