Whether you’re a freelance web designer who spends their days working from a coffee shop or a small-business entrepreneur with a team of staff, if you’re a self-employed individual and you’re thinking about buying a new house you may face some difficulty getting approved for a mortgage.
In today’s blog post we’ll share how you can provide paperwork and
other evidence to show your mortgage lender that you’re a quality
applicant who has the ability to make their payments.
Have Your Accountant Prep Your Paperwork
As a general rule of thumb, if you’re in business you should invest
in the services of an accountant to handle your tax preparation and
other financial matters so that you don’t miss anything important.
If you have an accountant, let them know that you’re applying for a
mortgage and ask them to create a package that includes your business
financials as well as your past two or three years of income tax
Watch Your Debt-to-income Ratio
Your debt-to-income ratio is one of the primary factors calculated
during the mortgage application process and if you don’t have a regular
paycheck or salary this is how your lender will assess your ability to
In short, this number is the percentage of your monthly gross income
that is used to pay debts, taxes, insurance, and other items. Add up
your car payment, loan payments, credit card payments, child support and
any other regular debts and divide this number from your monthly
income. If this number is too high, your application may be declined.
Ensure You Have A Clean, Stable History
Your credit rating – and that of your business – will be intensely
scrutinized by any potential lender in order to determine whether or not
you present a significant risk of missing a payment or defaulting
Maintaining a positive credit history can be challenging as an
entrepreneur, especially if you’re in the early stages of your business
and you’re relying on loans or other financing to help fund your
operations. Try to make sure that every bill is paid and avoid
situations that can leave a blemish on your credit report.
Seek The Advice Of A Mortgage Professional
Even if you have your past taxes and a clean credit history you may
still face a bit of an uphill battle in getting that mortgage approved.
It’s best to seek a mortgage professional’s advice as early on in the
process as you can, as they work with self-employed individuals
regularly and will be able to help you craft your application. Good