For many years now, mortgages have been reserved for the salaried. This has put vast limitations on home ownership for the self-employed. Recent years have seen the rise of entrepreneurs in each and every economy. This has prompted lenders to revise their lending policies to cater to them. In order to qualify for a mortgage, you must meet a certain criteria and this is expounded further. In this article, we look at how all is not lost for the self-employed person looking for a mortgage.
Proving Your Income
Due to the complex nature of incomes for self-employed people, it is necessary to prove your income. Ideally, the longer one has been a solopreneur, the better their chances of securing a mortgage. The lender will be looking at how much the potential borrower is earning and whether they are in a position to sustain their level of earning. The only point of contention is the question of taxation. Normally, accountants work very hard to minimize the amount of taxes that self-employed people pay. This is good because it reduces the amount payable by the individual as far as their tax bill is concerned but is not good for their mortgages.
The Status of Your Self-Employment
The structure of your business is another factor that is considered by the lender. The factors that are considered are whether the company is solely owned or whether it is a partnership or if the potential borrower is a contractor. A sole owner will be assessed differently depending on whether or not the business has been steadily making money or not. If in two years it has had a steady increase in income, then an assessment will be made on the average income for the two years.
For the case of a contractor, assessment will be based on the rate, multiplied by the number of working days in a year. A contract for the last year is also a requirement.
Use of Brokers
Since mortgages do not favor the self-employed, it can be necessary to attain the services of a broker who knows which lenders are willing to lend and those who offer deals that are favorable. This is a service that will add on to the cost of the mortgage, but in the long run it might pay off since brokers are always in the know. It is advisable to secure the services of a renowned mortgage brokerage firm and www.propillo.com is one such firm that is based in the UK.
Keeping Your Image Clean
Most entrepreneurs will come under heavier scrutiny than 9-5 workers. Any red flag will be highlighted and may be used as a scapegoat into denying a loan application. So it is best to avoid any poor spending habits that one might indulge in from time to time. Stay away from buying luxury items and the like for a considerable amount of time before applying for a loan to increase your chances of securing that mortgage.
It is evident that self-employed people will always be at a disadvantage as far as securing financing for home ownership is concerned but not all is lost. Perhaps if they followed some of the mentioned tips, things may just turn around for the better.
