Applying for financial products, specifically loans, can be a challenge for self-employed individuals. It might be a little more complicated than what employed mortgage applicants have to go through, but it is not impossible for self-employed individuals to get great deals on mortgages as well.
Self-employed individuals will have to take note of what metrics and requirements lenders are looking for in their borrowers. There are also documents that need to be prepared and provided along with the duly accomplished mortgage application form.
There are ways to make mortgage applications easier for self-employed individuals. Take note of the following steps:
Self-employed individuals must make sure that their income documents are complete and in order. The documents should indicate a steady stream of income. They also need to check their credit scores and pull them up if necessary.
Preparing for your application should actually be done a year or two before the intended filing of the mortgage application. It would be advisable to commit to less write offs for two years prior to their application. Note that write offs can greatly reduce your income and make you a less appealing applicant to lenders.
It is highly recommended for you to hire an accountant to put your financial records in order. Banks trust official documents prepared by professional accountants. An accountant will help ensure that the information you give to the lenders is accurate. This will also facilitate background checks. In addition to that, accountants can also point out lapses in your book of accounts that could potentially cause problems. This way, you can repair these lapses in time for your mortgage application.
You need to make sure that the income and assets you have on paper in the past two years prior to your mortgage application are substantial. This will give your lender the assurance that you have the financial resources to manage your repayments. Instead of splurging on vacations, keep as much money in your bank accounts and in your statement of assets and liabilities. Once you are approved and you have successfully bought your house, then you can take your well-deserved time off.
Your mortgage broker will serve as a bridge between you and your lender. It is important that your broker is informed about your declared income. They need this figure to negotiate with the lenders themselves. Give them enough information that will give them leverage when they negotiate. Lenders can research the average income in your field and industry and check if you are within the standard rates. Any discrepancies would be a red flag and the lenders can ask more questions or require more documents before they approve the mortgage application.
Lenders may not give self-employed individuals the same treatment as they give to regular employees, but that does not mean that they deny their applications outright. When you take the necessary preparations way before you have to apply for your mortgage, you can easily get approved with terms that are favorable to you as well.
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