When you are self-employed, it can be quite hard to get a mortgage loan. This is because banks and other lenders want proof and affirmation that they will recover their money. This proof is often more difficult to provide when you are running your own business.
In some cases, you might get a loan with a tremendous interest rate because you are self-employed. However, that will not be an advantage to you in the long run. You deserve to have a home loan at the same rates as those that have traditional employment.
Fortunately, there are several ways you can increase your chances of receiving a more competitive rate. In this article, you will learn what you can do to improve your chances of getting a fair mortgage. Let’s get to some essential tips to keep in mind if you are self-employed and seeking a mortgage.
Update Your CV
If you are going to apply for a mortgage loan, make sure you hand an updated CV together with your application. Make sure you clearly indicate how much you earn. Showing your experience and professional skills will help the bank understand that you are professional and trustworthy.
Don’t Take Lengthy Breaks In Between Your Jobs
Being self-employed is every person’s dream. However, if you intend to apply for a mortgage, make sure you avoid any long breaks of say 6 to 8 weeks long. Whether they are vacation or leave days; too many days off might affect your application. This is because most lenders want to see consistency and a steady flow of income that goes 12 to 24 months before your mortgage application. Consider all this before you put in your application.
Set Realistic Payments
This is another mistake most self-employed professionals make; the mistake of setting unrealistic payments. Whatever the case, be true to yourself when coming out with payment figures. You want to be sure that you can afford to pay back the amount you commit to. Otherwise, you might default and end up paying more interest.
Make At Least A10% Deposit
Most lenders will require you to have a good-sized deposit when you apply for a self-employed mortgage. Not so long ago, it was possible to secure a mortgage with just a 5% deposit, but those days are gone. Ideally, you should aim to have at least a 10% deposit ready to pay upfront.
Apply For Mortgages That Allow Other Payment Options
In most cases, self-employed people have more money than those who have to wait for a pay-check at the end of the month. This is thanks to frequent customers and contracts. If this is the situation you are in right now, you are better off seeking mortgages like allows huge chunks of payment as opposed to monthly payments. This will help you be able to pay your mortgage quicker compared to making monthly payments.
Things To Look Out For In A Lender
You might have to consider several things before you settle down for a particular lender, and these include the following.
- What interest rates are they offering?
- What are the terms and conditions available?
- Is there any down payment? How much is it?
- What qualifications do I need to get the mortgage approved?
Bottom Line
We all know the excitement that comes with buying your first home. However, as a self-employed person, you should look beyond the beautiful neighborhood and that relaxing pouch. Your lender and how much you have to pay should be the biggest determiner in all this. Also, do not settle for any lender before reading the fine print. Owning your own business can be hard enough, there is no need to struggle with getting a mortgage!
