Getting a Mortgage if You’re Self-Employed Requires More Effort
Getting a mortgage these days is tough enough, trying to achieve the same lofty goal if you’re self-employed is even worse. Granted, when the economy was in the darkest depths of the financial downturn, self-employed parties needed an extra large dose of luck. Even then the chances were almost nil.
Fast forward a few years and you have a collection of successful folks who decided to go it alone once they lost their jobs during the recession. It was one solution to an endless parade of closed doors and rejections. Now some of these entrepreneurial business people have reached a point where they want to upgrade their homes to better accommodate their office space. Or, they may even consider a stand alone office.
Either way, the majority of these buyers will need a mortgage. Lending companies are starting to take a second look at these individuals and seem to be receptive to self-employed mortgages, with reservations. Essentially, the more you do your homework before you step foot in a financial office, the more likely you’ll be able to secure your funds.
The first thing self-employed parties need to do is bone up on the mortgage industry. It may seem like a foreign language in the beginning, but mortgage tutorials are just as effective as those language programs that can have you speaking like a native, as long as you put in the effort. Books like “Mortgages for Dummies” penned by Ray Brown and Eric Tyson, break down the process in easily digestible segments.
Next, gather all your paperwork for your trip to see the mortgage broker. Insist on a face to face visit rather than depending on the mail, phone or internet. You’ll usually do a much better job of selling yourself if you look the lender in the eye. Face to face meetings mean questions get answered on the spot, rather than forcing you to wait for a responding email, and the next one, and the next one and so on. Besides, once you meet the lender and make a point of keeping in touch throughout the process, that person will remember you. Visit more than one lender to find someone you like, it really cuts down on the stress level.
About that paperwork, you’ll need proof of income, which for the self-employed usually means tax records. You should also find out your credit score, easily obtained, for a fee, from sites like Fair Issac at www.myfico.com or through credit bureaus. Credit reports are provided free once each year from TransUnion, Experian and Equifax. Finding and fixing anything negative on your credit report goes a long way with a lending agent. It shows you are serious, and a better financial risk.
And about those tax returns, avoid using creative accounting methods to minimize your tax payment. These methods may be legal, such as using various methods to report different types of income, but they do make it more challenging to verify the information. If yours is a cash business and you don’t declare everything, which first off is illegal, your total yearly income will show a decrease and you may not quality for that mortgage.