What Self-Employed Mortgage Seekers Need To Know When Searching For A Mortgage
For self-employed mortgage seekers, qualifying for a mortgage may be difficult if you can’t prove your income. Mortgage brokerages usually have a network of lenders who cater to the needs of self-employed individuals looking to own a home. Most big banks need to see evidence of a stable and visible income before approving a mortgage application. Many entrepreneurs are not able to provide this as they face numerous challenges when applying for a mortgage. It seems like the mortgage regulations to qualify continue to get tighter which is why you should be contacting a mortgage professional.
Strict Lender Requirements
Most lenders will require entrepreneurs, small business owners and freelancers to state their income or the amount they claim to earn by providing documentation such as tax returns, contracts and financial statements. Many of them are unable to fulfill these strict requirements especially since they lack the documents to substantiate their income. The biggest challenge self-employed mortgage seekers typically face is proving their income.
The government has tightened up the mortgage rules for lenders. Debt repayment history and whether their business has had a healthy cash-flow to be put into consideration. They now analyze the average income for the industry in which the self-employed borrower works in. Other factors considered is the length of time the person has been in business and their type of business.
Get Your Finances in Order
If you are a self-employed individual looking for a mortgage, start by making sure you maintain good credit. Debt service ratios will have an impact on whether your application is approved or not. Increase your savings so that you’re able to make a larger down payment. Having a co-signer for your mortgage may also be a great idea to sway the lender to approve the application.
Gather Supporting Documents
Pull together all the documents you need to show your income like, your business license, certificate of incorporation and financial statements. If you are uncertain about what documents you will need to pull together, talk with your mortgage advisor who can help.
Consult a Mortgage Professional
Mortgage Brokerages offer more options for self-employed mortgage seekers through their large vetted lender networks. Your brokerage can shop your mortgage for the best available rates, terms and conditions. It gives you an opportunity to explore your options without doing the legwork yourself.
If you have any questions about this article contact me directly and I would be happy to answer any questions you may have.
Patrick Palmer: The Mortgage Cat
Licensed Mortgage Agent (Lic.#16000311)
South Oakville Centre, 1515 Rebecca Street, Unit c33, Oakville, ON L6L 5G8