Are you a self-employed individual and aim to qualify for a mortgage loan?
Then, check on the “Think Plutus” for more material, you need to know about getting a mortgage. Here I have listed down a few things that can make you an ideal and attractive applicant for lenders:
Increasing or Steady Income
If you are a self-employed applicant for a mortgage loan, you must have a stable income to show the lenders. It is ideal if you get to earn or increase income every month. The positive fluctuations are acceptable, but if your monthly income decreases every single month, it can potentially weaken your case. Your income must depict an upward trend. To verify your income, mortgage lenders will ask you to submit a record of tax returns. This way, lenders get to assess the nature and amount of your business income. They will look into year-to-year graphs to examine the expenses, gross revenue, and taxable income.
Good Credit Score
Next, you need to work on your credit scorecard. If it is good, you have high chances to get a mortgage loan and vice versa. Most lenders are reluctant to give mortgage loans to applicants who have a bad history of debt payments. So lenders aim to see if you have a respectable record of making debt payments or not. Perhaps, you agree that foreclosures, collections, delinquencies, and bankruptcies are referred to as the increased risk of not getting a mortgage. Thus, it is vital on your end to maintain a good credit history for acquiring a new mortgage.
Considerable Down Payment
Precisely, the more you are willing to pay as a down payment, the higher chances you have to receive a mortgage loan. The significant down payment provides a guarantee to mortgage lenders. They attempt to evaluate your application by looking at the amount of down payment you are up for. If it is high, they consider you as a potential candidate with financial stability or healthy financial status. This way, they can judge if you will be able to make the monthly payments on time. Thus, offer a large down payment to obtain a mortgage loan.
Lenders also desire to evaluate your financial status by looking at your cash reserves or emergency fund. You must know that having plenty of funds in your emergency pool is essential to mitigate probable risks of delayed payments. This way, lenders can realize that if you are low on your monthly income, you are still able to make debt payments.
You should know that it is easy to get a mortgage if you have a single-unit home. It is considered a low risk for mortgage lenders. Single-unit home is the principal residence of a borrower. However, if you are looking to get a mortgage on your second home, multi-unit properties, investment properties, or manufactured property, you can still receive a mortgage. But, you will be a high-risk applicant for mortgage lenders.
Fewer Monthly Debt Payments
It is sensible on your end to pay off all your consumer debt before applying for a mortgage. The less you have monthly debt payments, the high chances you have to receive a self-employed mortgage. Although it is good from lenders’ perspectives, it is also great on your end. You will have less stress for paying mortgage payments every month. Hence, you need to get rid of credit card payments, car loans, etc. This way, you can conveniently qualify for a higher mortgage.
Ideal History of Self-Employment
It is said that mortgage lenders desire an established self-employment track record from applicants. That’s how they can assess if the candidates are capable enough for the self-employment game. If you can prove that you are a potential self-employed individual who knows how to play the game and win, the lenders will consider offering you a mortgage. Some say that you need to have at least two years of self-employment history. Your employment history gives assurance to lenders about the consistency of your income. It is difficult to obtain a mortgage if you are newly self-employed.
Lastly, you need to provide complete documentation. Keep a record of your income and get your earlier years’ tax returns. Besides, you need to document your balance sheet and profit & loss statement to ramp up your probabilities of qualifying for a mortgage.