Contrary to common public perception, it is not impossible for self-employed Americans to get a mortgage. It may be true that you will have to produce additional documents to prove that you have a steady income to afford to repay your debts, but it can be done.
Some loans are available for self-employed borrowers, like conventional loans and FHA loans. How do you increase your chances of getting approved? For one, you need to improve your credit score. The lender will be wary of approving your application if there’s a lot of red flags when they look at your credit history, so repay as many debts as soon as possible. Another option you can do is to get help from a cosigner and apply for a joint mortgage. This way, your cosigner’s credit score will also be considered and pull you up.
Honestly, it will be an uphill climb to get a loan for a self-employed borrower. Creditors tend to view self-employed borrowers as somebody who may not have a steady income unlike those who are regularly employed. Employed borrowers can easily produce their W2 as compared to those who are self-employed.
Another challenge that a self-employed borrower may face would be from banks who might consider giving weight to the lower loan-to-value ration – this might cause the borrower to put down a bigger down payment amount to qualify. Add to this is that wee are is still in the forefront of the COVID-19 pandemic battle, and because of this, lenders are still looking for higher credit scores, bigger down payments and more proof of financial stability.
So how do you increase your chances of getting approved as a self-employed borrower? Here are some ideas:
- Show the lender that you are a stable self-employed earner, two years at least or the longer the better.
- Get the best credit score possible
- Pay a bigger down payment
- Prepare as many financial documents (to prove your financial viability) as possible
If you want to know more, we can help you start your journey on owning your own home even if you are self-employed.