When you are self employed things look different than when you work for a company. When running a business your income is affected to a large degree by various factors often beyond your control. While there are no home loans geared specifically at the self employed the main difference lies in the documents you will need to provide and the choice of a mortgage loan.
Present and Future Dilemmas
As a self employed person you observe some ups and downs in the market, a lessened demand for goods and services when business slacks. However that the future cannot be easily foretold. The question you need to ask yourself is what term you are interested in as many things can change during the period of 15 or 30 years. If the business is not doing well and you need a house immediately the odds are you would prefer slightly lower rates before you reach the safe shore. Then again that might not be the best solution in the long run when rates go up finally and the business folds up. The possible worst case scenarios include filing for bankruptcy and starting anew in life with no house.
Am I Going to Get a Good Deal?
The revenue from your business will be the basis for the loan officer and then the underwriter for making a decision to approve the application. Other things for consideration are a credit score and a down payment. As an individual you are also held responsible for any mishandling of payments, be it credit cards or an auto loan, with no leniency shown. Major credit bureaus recalculate each person’s score to include any changes made and so, your credit either drops or increases depending on your earlier decisions. Here that is what also matters even if you are self- employed. With a good to excellent score you are way on the fast track to good rates on a mortgage loan. Many Americans believe their fair credit is good enough, but that depends on the lender’s policy and those remaining factors.
Another thing is your willigness and ability to present the lender with enough of the required down payment. Typically, it is around 20%, but could be lower if the other two factors are perfect enough for a lender. Some people manage to negotiate even as little as 5% with good rates and not much insurance, so if you are lucky enough and deft at presenting and arguing your case, all the better.
Mortgage Loans for Self Employed
The whole procedure takes several weeks or more. You are advised to search for the best deal after holding talks with several lenders at first to check out how things are and only then make your choice. Do not leave anything to chance just like you would not do so when it comes to your business.