Self-employed. Can I still qualify for a mortgage?

As someone who is self employed, of the first things to consider when looking at any mortgage is can you afford it. The bank will be able to tell you if you qualify or not. However, it is you that will know best if you can realistically afford the monthly payments. Take stock of your income and outgoing payments and be realistic. Once you are sure that you can afford the mortgage you can begin to prepare yourself adequately.

Make sure that you are as an attractive candidate as possible. Here are 6 things you can do to increase your chances of qualifying for the loan.

1 Do all you can to improve your credit score.

The higher your credit score the better the chance of you being able to borrow a larger amount. This will also allow you to qualify for lower interest rates once you are approved.

2 Be prepared to offer the largest down payment you can afford.

The greater the equity that you have in the home, the smaller the chance that you will walk away from it should you fall on hard times. This will make the bank see you in a more reliable light if you are able to put up a larger amount of money up front.

3 Keeping an emergency fund is also a great idea.

Being able to show a bank a large amount of money is set aside incase of emergency is also a very good way to seem attractive in their eyes. This is a very important factor for self employed people. If your business goes through a rough patch, having the ability to to tide yourself over with this fund is very encouraging to a bank or lender.

4 Get rid of any consumer debt.

When calculating the ratio of what you can and can’t afford, monthly consumer debt payments are taken into account. By paying off your credit cards and car loans you could even increase the amount of the mortgage you are hoping to get as you will have more cash flow.

5 Be ready to show your strong history of self employment and business management.

By having a proven track record of self employment lenders will be much more willing to consider you a good customer. By having around 2 years of solid income from your self owned business you will have demonstrated that you can deliver on a number of different financial commitments and are secure in the day to day running of your source of income.

6 Have all of your documents handy and organised

Keeping records is not everyone’s strong suit, however it is very important to have records of multiple years of tax returns, balance sheets and any other documents that you believe will be useful for demonstrating the health of the business. Anything you have that can show the business in a profitable and stable light will go a long way to convincing the lender to approve you for a loan.

One of the most important aspects of the whole exercise.

The reason lenders are a little more cautious when a self employed individual is seeking approval for a loan is that they often view self employed people as having a less secure source of income. This is not always the case and it is up to you to convince them of the strength of your business. This can be done through a number of ways, most brokers will be happy to give advice on what documents to best show to present yourself in the best possible light.

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