Tips for Getting a Mortgage for the Self-Employed

Tips for Getting a Mortgage for the Self-Employed

Have you been told that you cannot get a mortgage loan because you are self-employed? While it may be more difficult to do, it is simply not impossible.

Being self-employed can be a great way to make a living. It has the advantage of making your own hours and being your own boss. But it also has its disadvantages. Getting a mortgage when you are self-employed is one disadvantage because it is more difficult to qualify for a mortgage loan. It is not, however, impossible to do. Consider these tips if you are self-employed and you are looking for a mortgage loan.

Keep Records of Your Income

If you are self-employed, you should be keeping good records at all times. But for the purposes of qualifying for a mortgage loan, it is essential to have good records of your income. Some of the documentation you will need to provide to show that you have an income that qualifies for a mortgage loan may include your tax returns for the last few years, documentation of your investments and interest that you are receiving from those investments, your bank statements and even some receipts from the last few months which will help demonstrate your current income.

Work with a Mortgage Broker

This tip isn’t just for the self-employed, but the self-employed can benefit greatly from using a mortgage broker. A mortgage broker often offers more options for a mortgage loan because they know which banks and lenders are more likely to work with a buyer who is self-employed. A mortgage broker can find those lenders and save you hours and hours of legwork trying to find that information on your own.

Have a Significant Down Payment and Good Credit

As a self-employed person, you tend to be a greater risk to banks than buyers who are employed. As a result, most lenders are going to require a sizable down payment of at least 20 percent of the purchase price of the home. Some lenders may even require more. You will also be required to have next-to-perfect credit in order to be considered by most lenders for a mortgage loan. You may have to have a credit score of 720 or even higher. It’s not impossible to get a mortgage with a lower credit score, but you will be paying a higher interest rate based on how low your score is.

Be a Secondary Applicant

If you are the husband and you are self-employed and your wife has a steady job with a steady income and a W-2, you may need to put your male pride aside and be the secondary applicant for the mortgage loan so your wife can be the primary applicant. If she has a steady job, you will have a better chance of being approved and at a lower interest rate than if you are the primary mortgage loan applicant.

Get a Co-Signer

Co-Signers for mortgage loans are nearly impossible to get. Many buyers do not even want to ask anyone to cosign for their mortgage because it is such a huge responsibility. But if you have a parent or family member who is willing to do it, you could increase your chances of being approved for a home loan despite the fact that you are self-employed.

Buying a home as a self-employed buyer may take some extra work and extra steps, but it can be done. Just know what your credit score is and how much you can afford before you begin your search.

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