Are You Self Employed? We Have Mortgage Options for You
If you’re self employed, you’re likely to face added obstacles when applying for a mortgage, when compared to someone who earns a regular salary through an employer.
But if you can prove your income, show you’re up-to-date on your taxes and you have solid credit, your chances of being approved for a mortgage are greatly improved.
There are essentially two types of self-employed or business-for-self (BFS) borrowers – those who can prove their income and those who can’t.
If you’re unable to provide traditional income verification but have a proven two-year history of responsibly managing your credit and finances, there are stated-income mortgage products available.
Under these programs, you may be able to borrow up to 90% loan to value (LTV) – meaning the down payment can be as low as 10% of the purchase price, with at least 5% coming from your personal savings. The remaining 5% may be gifted by an immediate family member.
Eligible borrowers typically own a small business for a minimum of two years. In addition, the borrower is required to declare annual income and business revenue, which should be reasonable based on the industry, length of operation and type of business.
The income amount you’re stating has to make sense based on your business. This is important, because the chances of finding lenders to fund this type of deal are significantly boosted if the mortgage is insured.
Lenders and insurers are well aware of the tax write-offs that BFS borrowers can leverage, but these deals are accepted or declined based on average incomes for specific fields, as well as your credit rating. It pretty much goes without saying that those with credit blemishes will have a tough time obtaining traditional mortgage financing if they’re self employed.
Alternative and private options
If you don’t qualify for traditional financing all is not lost, since you may be eligible for alternative – or private – funding.
We have access to alternative and private lenders who are willing to lend money to BFS individuals looking to obtain mortgages. Although you’ll pay a higher interest rate and added fees when you go this route, it may be worthwhile if it enables you to get into a home sooner.
Have questions about your mortgage options? Answers are a call or email away!