If you’re self-employed, then chances are you know a thing or two about how hard it is to secure a real estate mortgage. Lenders scrutinize self-employed borrowers’ income, tax returns, credit and savings more so than borrowers who work for traditional employers, and turndowns are commonplace. The good news is that for the right borrowers, loan options are plentiful.
Unlike the plain vanilla 30-year-fixed loans that every lender offers to qualified borrowers with a W2, programs for the self-employed vary widely. That means legwork (or phone or Web work) for you. Not interested in wasting time making phone calls or comparing rates? Contact a local mortgage brokerage and discuss your options.
Loan officers who regularly work with self-employed borrowers can help you tailor your application. For example, a loan officer might suggest adding back depreciation and salary items to increase income. Also, some lenders offer specialized loan programs that accept bank statements and deposit amounts as proof of income. For cash-focused businesses, using these statements instead of tax returns is a godsend.
Keep in mind that even for these alternative lending programs borrowers must still meet stiff requirements. The bottom line is that you must be prepared to put down at least 15 to 20 percent (often more), have excellent credit and prove several years’ of steady income. In other words, 10 percent down, a year and half of history and a 680 credit score probably won’t make you an attractive loan candidate if you’re self-employed.
Finally, do loan research at websites, such as Bankrate and Lending Tree. Rates, programs and requirements change every day. The best way to increase your lending options is to make yourself the most creditworthy, financially sound business owner around.