Buying a house can be frustrating – even for small business owners. Some have the misconception that owning a business gives you an edge when applying for a home loan. The reality is that applying for a home can be trickier if you’re a self-employed individual.
To increase your chances of mortgage approval, here are some tips worth keeping in mind.
Verify Your Employment
For a W-2 employee, verifying your employment is easy. One only needs to provide two years worth of tax return. Your mortgage lender will verify this, give your employer a call, and you’re good to go. However, for self-employed individuals, it can be a lot trickier to prove you have steady employment for the last two years. You need to provide all the necessary paperwork to verify your work.
Good Read: Basic Facts About the W-2 Form
Build Good Credit
Your personal credit and business credit score both needs to be good enough to qualify for a mortgage loan. Work on improving your credit, and you’ll enjoy better interest rates and terms. Be responsible when it comes to your financial obligations by paying your credit dues on time. Pay off your debts and avoid opening new credit lines.
Save For A Bigger Down Payment
When it comes to mortgages, don’t settle for the minimum down payment. Just because your Mortgage Broker Grand Prairie told you that the lowest down payment required is 3.5%, it already means you should stick to the 3.5% down payment. By putting down a larger deposit, your lender will think you can afford the loan, giving them the confidence that it is worth approving your mortgage application. You also get to enjoy better terms and rates with a larger down payment.
Talk To A Mortgage Broker
When applying for a mortgage, you won’t only need to save enough down payment, but prepare funds for the closing costs. Your Mortgage Broker Grand Prairie or lender should be able to tell you how much the closing costs will be. Don’t hesitate to ask them all of your questions before signing any papers.
Know The Minimum Requirements For Each Home Loan
The thing about mortgage loans is that while they have just about the same criteria, they differ in the minimum requirement. Take credit scores, for example. Conventional loans require their borrowers to have at least 620 FICO score while FHA loans accept those with 500-580 scores. The minimum requirements will also depend on your Mortgage Broker Grand Prairie. Different lenders have varying minimum requirements. Make sure to shop for lenders and check what their minimum requirements are when planning on your mortgage application.
Declare Income Accurately
Much like your employment status, proving your income requires more scrutiny from the lenders. The problem with some entrepreneurs is that they some opt not to declare their actual income. When applying for a mortgage, you’ll provide tax documents to prove how much income you get monthly and yearly. Understating your income can lead to lower chances of getting approved for a mortgage. Make sure to declare your income accurately, and you can provide your lender with evidence that you can afford the home loan.