Researchers have shown that many people who are self-employed feel they are at a disadvantage when it comes to getting a mortgage. Several people worry that they’ll never be able to afford a house of their own.
Tide, a mobile banking service, provides some suggestions for you if you find yourself in this position.
“while many lenders favour more ‘conventional’ borrowers, securing a mortgage as a self-employed company owner is completely feasible,” Sarah Young, VP of member engagement at Tide, stated.
If you have twenty percent or more ownership in a business and receive most of your income from that firm, lenders will consider you to be self-employed.
You can be self-employed in a variety of ways, such as a single trader, director of a limited liability company, partner in a business, or independent contractor.
Make sure your lender knows about all the money you bring in, not just the self-employment revenue.
Things you can do to get ready for a mortgage:
Rectify your financial records.
Most mortgage providers will want two to three years of tax returns, bank statements, and W-2 forms as proof of income when you apply for a loan.
Finding a reliable accountant is a crucial first step since certified accounts must be produced by a licenced accountant.
Do what you can to keep your credit rating high (both personal and business)
Reduce the number of times you apply for new credit and always pay off your balances in whole and on time. Get on the voter registration register, settle any overdue bills, and pay off any unused credit cards.
Don’t go overboard
To ensure you can make the repayments, lenders will conduct an affordability assessment that takes into account your income and expenses (such as rent, vehicle payments, credit card debt, and food).
Spend as little as possible each month in the months leading up to your mortgage application. Spend less on discretionary items until absolutely necessary.
Consult a mortgage professional.
Rejection rates can be lowered and credit application rejections avoided thanks to an adviser’s familiarity with the industry and access to the finest bargains.
Put up a sizable down payment
The stronger your credit and the size of your down payment, the more likely you are to get the loan you need.
Keep your business connections strong.
Creditors want to see that you’ve been successful in the past, and they’ll look favourably on any future, assured projects you have in the works.
If you’re in the service industry, you should try to lock in regular, long-term clientele through contracts or retainer fees. They will show a lender that you are a safe bet, with the ability to keep or enhance your income in the future.
Sarah elaborated, “There are a few things to keep in mind while comparing mortgage companies. Fixed rates, interest rates, minimum and maximum contract length, down payment percentage, ability to refinance, under/over payment options, and other terms and conditions.
An optimal strategy should take into account both the near and distant future.
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