Self Employed Mortgages - Facts & Advice

If you are reading this article, it’s very likely that you are:

• Self employed, or planning to be.
• On the market to buy a house, or thinking about it.
• Trying to contact lenders, with little or no success.

Being free of the office cubicle and the harassment of a supervisor has its advantages, and disadvantages – Such as not having a fixed paycheck, not being able to submit the papers necessary to get a mortgage at reasonable rates, or prove your stated income. This often leads to self employed people, including sole proprietors of a new small business, not being able to qualify for a standard mortgage.

The first, and major, hurdle is that most lenders require you to produce at least one or two years of tax returns as a self employed person. Sometimes, things are not exactly planned to work this way, and you may be in need of a mortgage before you have worked for yourself for the requisite year, or two. Property prices might be low in your area, or a specific property which you really like might be on the market. Your marital status might change, putting you in urgent need of a house, or you might be in urgent need of re-financing. What are your options?

After the recent subprime mortgage meltdown, very few lenders are willing to touch customers with insufficient paperwork. Those that do, charge a heavy premium, with larger down payments in excess of 20% of full cost, higher interest rates and credit score requirements in excess of that for a similar, conventional mortgage. In short, if you want to skip the line, you need to pay for it. While this mortgage surcharge is an undeniable reality for the newly self-employed, there are ways that you can mitigate the impact and shave half a point or more off the mortgage rate.

The fact is that loan officers often approve mortgages based on a case-to-case basis. If you have maintained perfect records of all your transactions, have a good credit score with monthly payments on debts being made with no missed payments, and you have contract letters from customers showing intent to place orders or require your services, that does make a significant difference. Do your research and contact lenders personally, bring all your documents along, and explain your current financial status and your stated income. The loan process will be eased considerably if you can convince the lender of your viability, regardless of the paperwork.

What you also need to do is find a trusted, and local, real estate broker or mortgage expert who has prior experience dealing with people in situations similar to yours. Lots of professionals in the real estate industry have decades of experience and personal relations with lenders. If the broker thinks you’ll be able to meet payments, he’ll be able to convince the lender to approve your loan even if you are unable to produce all the paperwork. At the very minimum, the broker will take a look at your papers and give you a fair and accurate estimate of your chances for securing a mortgage, and offer suggestions to improve your chances, along with references to meet specific lenders who might be able to help you.