Home Buyer & Home Seller Guide

Self employed individuals sometimes find it a bit harder to secure finance to get a home loan. In certain cases mortgage lenders and financial institutions do not want to deal with the extra paper work that comes with the approval of a self-employed loan. In addition to this there may also be concerns that you may be unable to earn steady employment as an employed individual would, giving rise to speculations about mortgage repayments. However, do not lose hope there are still several proactive things you can do to wow your credit officer. Listed below is a list of such things:

Tips For Self Employed Home Loans

1. Documentation: As a self-employed individual collect as much documentation as you can in order to substantiate your income. This could include things such as bank statements, income tax returns for the previous years, statement of accounts etc. Make sure that these documents give a true and correct image of your financial situation and clearly exhibit your ability to make the repayments on the mortgage loan.
2. Save: In the case of self employed individuals, this is more important than it would be for someone who is a payroll employee. Try and save as much as possible for your home loan. Cut corners and pinch if necessary. Self employed borrowers should try and save as much as 20 percent as a down payment on their properties. Banks need to be able to see that you have shown sufficient commitment towards attaining the property and consequently keeping it. The larger the down payment the smoother is the processing of your home loan application.
3. Restructure: It is always beneficial as a self-employed individual to re-structure your business. Speak to your lawyer or accountant and ask them about your options of restructuring your business. The idea here is to structure your business in such a way that you are able to write out a paycheck to yourself and appear to be an employee of the organization. This could be by way of converting your company into either a corporation or a private company etc. As far as restructuring is concerned it is best to seek legal advice on the matter.
4. Credit Score: It is in your best interest to try and increase your credit score as much as possible before applying for a home mortgage loan. If you have a credit card or a personal loan, take active steps to pay it out as soon as possible. The same should be applied to any hire purchase agreements or lease to buy options. If you have a major credit card, pay down the balance in full each month. These steps will ensure that your credit score receives a big boost.
5. Track Record: Prior to approaching your lender for finance document a track record of being self employed. This could include documentation which proves length of being self-employed, documentation proving level of income and also the fact that you have been sufficiently long in the same industry. These factors cumulatively help prove your self-employed track record and consequently make your case stronger.

In certain cases self-employed borrowers also prefer to apply for non-traditional forms of home loan finance. This could include vendor financing, or leasing with the option to buy. Depending upon your circumstances make sure that you have completely considered all your options prior to settling.