How to Qualify for a Mortgage When Self-Employed
Buying a home is daunting for anyone, but it is notoriously hellish if you’re self-employed. While being your own boss has plenty of benefits, it can also bring periods of no work and unstable income. As a result, it can be hard to prove to a mortgage lender that you can pay back a loan for a home. The key to making it all easier is to plan ahead.
Make sure you can verify your income.
Lenders want to know how much money you earn before they decide whether or not to give you a loan. It makes sense – they want to know you’ll be able to pay them back. When you’re self-employed, you’ll have to hand over your last two tax returns. To do this, you’ll fill out IRS 4506-T, giving the lender access to your tax records. Lenders may also ask for your business license.
Be aware of large deposits.
If you’re self-employed, your income may be irregular and unstable at times. When you have a large, irregular deposit during the mortgage process, it can be a problem. The deposit often has to be part of the borrower’s regular income, matching ‘common or usual activity’ in your account. Be prepared for this, as you may need to provide even more documentation.
Improve your credit score.
A good credit score is important for anyone applying for a mortgage, but it can be especially important for those who are self-employed. Typically, lenders like to see scores of 740, and higher. To keep your credit in check, don’t take out new loans or add more debt to your credit card, keep accounts in good standing open, and pay accounts on time.
When you need help obtaining a smart mortgage for your needs, contact Dean Rathbun. We can help you determine the right plan of action for your real estate needs.