Mortgage Help for the Self-Employed

There is no doubt that it is infinitely easier to qualify for a loan if you are employed in the traditional sense and trek into an office everyday.  However, many self-employed individuals need to apply and be approved for mortgage loans. Although you will have to jump through a significant number of hoops, mortgage approval can be obtained as a self-employed entrepreneur, as long as you are working regularly and you can prove that your debt/asset ratio is low.

The most important thing we advise you to do is make sure that your credit score is as high as humanly possible.  Many lenders will take one look at the fact that you are self-employed and decide that you are not worth the hassle of all the added paperwork and time that will be involved in getting you approved. That being said, if your credit score makes their eyes pop out of their heads, they will be likely to give you a second look. Stay up to date on all of your obligations and bills AT ALL TIMES. Talk to your credit repair attorney for the best ways to boost your credit score quickly.

Expect a longer application process than the standard applicant. Lenders will need you to prove that you can afford the loan and that you are not involved in anything shady, like drug deals or fraud.  Your bank accounts, credit reports, past taxes, birth certificate, and many other documents will be scrutinized carefully and by a number of people.  Be sure that you have enough money in your bank account to pay for closing costs, because lenders may require you to pay a higher down payment due to the fact that you are considered a riskier borrower.

Traditional employees simply need to provide lenders with the previous year’s W-2 form to show proof of income.  Since self-employed individuals do not have W-2s, be prepared to be able to show significant proof of the financial success of your business, which may include previous tax returns, business licenses, written statements from your accountant, profit/loss statements, and balance sheets.

If you’re a relatively new entrepreneur and are having difficulty providing many of the above forms of documentation but are still in need of a mortgage loan (in situations like divorce or relocation), consider having a co-borrower who is a W-2 employee join you on the loan documentation so the lender feels more confident about approving you. This could be a spouse or close relative who is positive this is something that they are willing to do.  You must BE SURE that you are not going to default on the loan in this case.  To do so would leave your cosigner with full responsibility and could ruin an important relationship.

For more helpful information about getting approved for a mortgage when you are not the ideal candidate, contact an attorney who is knowledgeable in credit counseling. Whatever you do, don’t give up on owning a home simply because you don’t work a traditional job! You are already used to putting forth a greater effort to accomplish most things, since you’re an entrepreneur. Don’t let this be the hurdle that makes you fall.  Get a running start, and you’ll fly over this obstacle too.

Photo credit: Philip Taylor PT

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One Response to Mortgage Help for the Self-Employed

  1. Pingback: Can a Low Credit Score Affect My Success as an Entrepreneur? | Veitengruber Law

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