Self-employed individuals often find themselves struggling to qualify for mortgage loans through traditional banking institutions. This is because banks have become incredibly rigid in setting their standard for client criteria. The documentation they require, such as w-2 forms, aren’t so easy for the self-employed to acquire. What is a self-employed upstart like yourself supposed to do? You read the information below and keep it in mind as you set forth on the path toward home ownership.
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Tips to Help the Self-Employed Qualify for a Mortgage Loan:
Though many conventional lenders will wince at the thought of working with the self-employed, who they may deem a higher risk, all hope is not lost. These tips, when applied together, will help you to get into the home of your dreams.
Recruit the Help of a Mortgage Broker:
Mortgage brokers are free for clients and help connect them to lenders who will gladly work with them. A mortgage broker can do business with lending institutions of all types, including those who might even favor the self-employed. Even private mortgage lenders can appear on your broker’s radar! They’ll help you find the right loan for your mortgage aspirations, and at the best possible rates, too.
Work on Your Credit:
A great-looking credit report and a high credit score are two of the largest determining factors in whether or not a person is accepted for a mortgage loan. Get a copy of your credit report so that you can address any errors, prioritize your legitimate debts, and stay in the know in terms of your own financial wellness!
Be Ready to Verify Your Income:
Traditional T 4 documents are typically what banks will use to assess a client’s financial circumstances. However, the self-employed do not use these documents. Instead, you will have to provide additional forms of income verification, including:
- Income tax returns for the past two years.
- Notices of Assessment for the past two years.
- A signed declaration of income.
- Proof of your self-employed status.
- A copy of your business license.
- Financial statements pertaining to every aspect of your business.
- Proof that you own the business.
- Proof that you can provide a down payment of at least 15%.
This is a lot of information to provide, so try to begin gathering up these documents before you even begin the application process for a mortgage.
You Could Benefit from a Co-Signer or Spouse:
If you have a spouse or other co-signer who is paid a salaried or hourly wage and receives T4 documentation, this can greatly ease the concerns of lenders. While this might not be an option for everyone, it is certainly worth considering if you have a trusted person in your life who could co-sign your mortgage.
Qualifying Isn’t Easy, but it’s Not Impossible:
Being your own boss is the dream, isn’t it? Unfortunately, accomplishing this goal can present some hurdles on the way as you progress toward your dream of owning a home. You need to take care of your credit, keep strict and organized records of your business and finances, and recruit the help of industry professionals who work with the self-employed. When you do all of these things, your chances of approval through a lender will increase.