Self-Employed Borrower: 3 Tips To Secure a Mortgage

If you are self-employed, either as a freelancer/consultant or as the owner of your own business, your income can fluctuate greatly from year to year.office-620817_1280

That can make it difficult (at times) to get approved for a mortgage, though not impossible as some may think. Make sure you talk to someone well versed in reading income taxes…this is key when applying for a loan when you are self-employed.

Make Sure Your Credit Score Is In Good Shape

While your ability to pay back a mortgage is the most important factor in approval, your credit score is a close second.

That goes for every borrower, not just those who are self-employed. If you have a credit score in the high range — something above 750 or 760 — it will help you get approved for a mortgage. There are alternative programs available for scores that are “below the 700 threshold” but you will pay a higher price for them.

To boost your score, make sure you pay all bills on time, pay down your debt levels and don’t make any new big purchases or apply for new credit soon before you apply for a mortgage. If you are not sure of your score, have your mortgage professional pull your credit and give you tips on how to improve if needed.

Having a Larger Down Payment than standard FNMA will help as well

The more money a bank lends you to buy a house, the more risk it is taking that the money won’t be paid back. If you are self-employed and considered a higher risk to begin with, one way you can alleviate some of that risk is to be able to put down a larger amount of money (often 30% down will get you loan programs that less will not allow).

Have Significant Assets

One way to put a lender at ease about your ability to pay for a mortgage is to have significant reserves in the form of assets. Liquid assets are best for a lender comfortability, however, retirement counts as well. If you have large amounts of money in regular savings, brokerage, and retirement accounts, it offers a reserve for you to tap into should your income take a dive.

If you are self-employed and are thinking about buying a home, contact a mortgage professional to discuss your situation and to see what type of mortgage you may qualify for and “how much”.

To learn more about purchasing a home in the Bay Area, or in the State of California, please contact me today. I would love to help you through each step of the loan approval process.

Contact me at 408-506-0542, or email kcimera@goloanstar.com.

Karen Cimera

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