3 Things You Need To Do To Improve Your Chances Of Getting A Home Loan If You Are Self-Employed
Being self-employed has many benefits. You can choose your own schedule, you are your own boss, and you have a lot of flexibility. But one of the hardest parts about being self-employed is that it can make it hard to qualify for a home loan. Here are some things that you can do to improve your chances of getting approved for a home loan if you are self-employed.
1. Ask For Less Than You Can Afford
The mortgage companies generally see people who are self-employed as more of a risk. For this reason, they are less likely to loan you a great deal of money for your home since they know your income can be up and down. This is why asking for less that you can afford could improve your chances of getting improved. For example, most mortgage lenders will allow your debt to income to be around 43%. This means that all of your debt cannot exceed 43% of your income. However, if you are self-employed they might not let your debt to income ratio get that high. Instead, they may prefer that you keep a lower debt to income ratio. This is why going for a more affordable home could be the key to getting approved.
2. Have Good Savings
Another important thing is to do what you can to build your savings. If the mortgage company sees that you have a good emergency fund they might see you as a better candidate. For example, if you have 3-month's worth of expenses saved up, they know that even if you fall on hard times, or business is slow for a while, you will still be able to cover your mortgage payment.
3. Put Down A Larger Down-Payment
Lastly, you should consider putting down a large down payment if possible. Ideally you should put down at least 20% for a down payment. This is the magic number that prevents you from having to get mortgage insurance. The reason for this is that if you default on the loan, the bank has your large down payment, plus the sale of the house to cover their investment.
The larger down payment you have, the less a risk you are to the mortgage lender. This is why you should take time to save up as much as you can so that you can put a good deal down on the home.
By doing these things you can improve your chances of getting a home loan. Contact a business such as The Toby Team for more information.
