If you’ve never tried to buy a home before, there are a number of factors that lenders will consider. Some of them you may expect while others may not enter your mind until the lender asks for certain information. So what are the requirements for a self-employed mortgage? How about people who have less than ideal credit? In all instances, here are four factors that are sure to apply.
Your Income Sources
Lenders do expect applicants to have income that is verifiable and somewhat consistent. Income from a job is one of the more common examples. It’s easy to verify the amount that you make each month and determine if that amount meets the lender’s minimum requirements.
What if you’re self-employed? Documentation that confirms your income levels will often work fine. That includes your tax filings along with income and expense statements, reports on your Accounts Receivables, and similar information. Be prepared to provide documentation that covers anywhere between the last six months to three years.
Remember that other type of income can also be taken into consideration. If you receive monthly payments from a trust fund, some lenders will be happy to work with you. This is also true if you receive certain types of federal benefits. When in doubt, ask the lender what sources of income will be taken into consideration.
The Amount of Debt That You Owe
The relationship between your income and the amount of monthly debt that you currently manage is also something many lenders will look at closely. That’s because they want to make sure there’s enough money coming in to pay the mortgage while also continuing to remain current on your other obligations.
Paying down current debt so that more of your income is free to devote to the mortgage is a smart move. If it would be possible to pay off debt over the next several months and then apply for a mortgage, the odds of being approved are higher.
Your Credit Score and Past Credit History
Lenders are likely to pull financial information from at least one of the major credit reporting agencies. The score does receive some attention, but many lenders also want to take a look at the type of comments submitted by past and current creditors. It’s not unusual for them to be especially interested in the comments submitted in the last couple of years.
Essentially, this is a good way to get an idea of how diligent you are with honoring your financial obligations. The fact that you remain up to date on other commitments is a strong indicator that you will also make the mortgage payments on time.
The Amount That You Want to Finance
Lenders prefer to provide funding that covers a portion of the property’s total value. If you can afford to supply a significant down payment on the property, that means a lower amount to finance. Since the lender will maintain a claim on the property until the mortgage is paid in full, this helps to reduce the amount of risk to the lender. For you, it also means that you need less financing and can often enjoy lower payments and maybe even retire the mortgage sooner than anticipated.
Whether you need a first mortgage, a second mortgage, or some sort of emergency mortgage, there are lenders who are willing to work with you. Contact a broker and see what can be done. Obtaining the financing may be easier than you expected.