Getting a Mortgage if you are Self Employed

As a financial and banking writer, I spend the majority of my days writing about mortgages, deposit accounts and the overall state of the economy. O.k, so my job is mainly full of doom and gloom. No matter where you look you hear about how rates are at historical lows, but no one can get a mortgage or refinance thanks to ridiculously strict lending guidelines and depreciating property values.

While stringent guidelines are the knee jerk reaction to the “drive by” or “liar loan” mortgages that lenders were handing out like lollipops only a few years ago, these guidelines are a little too far over the top. Not only are many lenders demanding that applicants have a credit score of 740 or above to receive a good rate, they are requesting that applicants verify income and employees while making application AND immediately before closing.

I get it—they want to know you’ll pay back their loan since the foreclosure department has paperwork piled to the ceiling. However, what do you do with a nervous Nelly lender when you are self employed and rely upon sporadic payments from jobs? Will you automatically be disqualified from reaping the rewards of rates, not seen since the early 1970’s?

Don’t despair, there are steps you can take to secure a mortgage as long as you have strong credit and comply with your lenders rules and regulations:

• Collect tax returns and W-2’s to demonstrate income and employment. Consider including a few invoices from clients and letters written to your lender to let them know you are a solid, upstanding candidate for a mortgage loan.
• Show a consistent borrowing track record. Furnish the lender with documentation from previous loans demonstrating that you’ve made timely payments in a satisfactory manner.
• Provide a 20% deposit. Unfortunately, it will be a little more difficult for you to obtain a mortgage if you are self employed. Remove some of the hurdles by coughing up the traditional 20% down payment for your home, once again proving to the lender that you can successfully manage your money.

Also, not all lenders are the same. Look for a hometown, community bank or credit union as an ally. Most local lenders will want to work closely with you to see you succeed at receiving a mortgage. You won’t be a number and can actually gain insight into the mortgage process.

http://www.shuddup.com/featured/how-to-get-a-mortgage-if-youre-self-employed.html