Ever get the feeling that mortgages are designed for people with 9 to 5 jobs? You're not alone. Self-employment can sometimes cause potential homebuyers to hit a mortgage wall, due to a lack of steady income. Not to worry though. Self-employed folks can qualify for mortgages too! By being proactive, you too can get approved for a mortgage. These tips are designed to help you increase the odds of homeownership.
Shop for Homes Without HOA Fees
Believe it or not, homeowner association fees are included as a part of your mortgage calculation. So make a point to look for homes without any HOA fees. It may be the difference in getting approved or rejected by a lender.
Look at Your Tax History
Lenders determine your monthly income by looking at your most recent tax returns. This can pose a problem for those self-employed individuals who do not declare their self-income or opt for every possible tax deduction on their return. Your Notice of Assessment should be able to prove that you can afford a mortgage.
Improve Your Credit Score
While good credit may seem like an obvious mortgage factor, it is especially critical for any potential homebuyer who is self-employed. Reduce or eliminate any outstanding debt, and make sure that your bills are paid on-time. Good credit improves your debt-to-income ratio, which is another common mortgage factor. Having an excellent credit score can also land you a better mortgage rate.
Bolster Your Savings Account
If you have a healthy balance in your savings account, you immediately increase your odds in getting approved for a home mortgage. In addition, you may qualify for a lower interest rate. So before you talk to your mortgage broker, make sure that you have a rainy day fund on the books. If you have the equivalent of 10% down in your account, your odds increase exponentially.
Have Your Paperwork Ready
A mortgage broker will need several pieces of key documentation in order to approve a mortgage for self-employed individuals. The first and most important will be your Notices of Assessment. Your lender may also require the following during the application process:
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A copy of your business license
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Your business' financial statements
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Any paperwork showing future revenue (business contracts for example)
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Credit score reports for you as well as your business
