It can be challenging enough to find a reliable mortgage lender willing to offer you a loan at a fair price as a traditionally employed person. This difficulty is often more pronounced for self-employed individuals.
One reason for this is that traditional mortgage bankers can be skeptical of self-employment and will require several additional steps to verify your income.
Another common problem when working with a self-employed mortgage lender is that some act in a predatory manner towards their clients. For example, they may take advantage of your self-employment or poor credit to charge interest rates well above the national average.
If you’re not careful, you could find yourself falling victim to a self-employed mortgage lender simply because you believe you have no other options. Fortunately, that isn’t true. As a 5-star mortgage lender, BrightPath offers some tips for finding the ideal self-employed mortgage lender below along with what to expect from the process.
Type of Documentation You Will Need to Prove Your Income
As a self-employed individual or owner of a business, you have the same right to apply for a mortgage loan as anyone else. Without the benefit of an employer to confirm your wages, however, you should prepare yourself to submit extra documentation. Your self-employed mortgage lender will likely ask you for the following documents:
· Business tax returns from the past two to three years
· If you’re a contractor, proof that you have upcoming contracts for at least the next several months
· If you own a company, evidence of retained profits or dividend payments
· Financial statements prepared by your accountant
· Evidence of regular clients and/or proof of future commissions
· Identification such as a driver’s license
· At least six months’ worth of bank statements. If you are using your personal bank statements to qualify instead of your business ones, 12-24 months of personal bank statements.
· A list of typical business and personal expenses you must pay with your current income
A Word of Caution
While a self-employed mortgage lender has the right to request additional documentation to prove your income, he or she does not have the right to bully or take advantage of you. It’s best to cut any meeting with a mortgage banker short if you notice any of these behaviors:
· Offers you a very low rate by phone or email and then fails to honor it in person
· No mention of fees or lies about fees
· Not lowering your interest rate if the market rate drops
· Willing to do anything to make the deal, even if illegal
Prepare to Make a Good Impression
It might not seem fair, but some mortgage lenders feel automatically leery of self-employed applicants. You can help to create a favorable impression on the first meeting by coming in with a high credit score and the ability to make a large down payment. The longer you have been self-employed, the more likely it is the lender will see that you make a good living for yourself and don’t present as a high risk.
We welcome all types of mortgage applicants at BrightPath. You can also depend on us to always act in an ethical manner. Feel free to contact us today to learn more about getting started.