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For the Self-Employed Borrower: Getting that First Mortgage

November 8, 2016 By Chris

for-the-self-employed-borrower-getting-that-first-mortgage

A couple of years ago, the self-employed borrower’s chances of getting a loan were nil. Today, the odds have decidedly improved. Good economic conditions have paved the way for low mortgage rates. The same has also encouraged investors to take on loans from individuals with limited documentation.

Government-sponsored agencies that back loans are also taking an inclusive stance when it comes to self-employed borrowers. In July, Fannie Mae issued new guidelines that pertained specifically to self-employed income.

Combined, these create conditions favorable for business owners and freelancers to buy a house.

Are you ready for your first mortgage? To clue you in, here are the different phases you can (and should) go through.

Phase 1: Research

There’s no surefire way to get that home loan. However, there are things you can do to up your chances for approval. The right information makes for an empowered borrower, particularly one with your circumstances. These guide questions can help make research easier.

What loan options are there?

Being self-employed, standard loan products may not be applicable to you. Now that doesn’t have to be a drag because alternative loans come in varieties too. There’s the stated income loan that allows you to indicate your income on the application form, without the need to furnish tax records and paystubs. A bank statement loan allows income verification via the activity on your accounts, as indicated by your bank statements. Read up on the guidelines for these so-called ‘alternative loans’ so you’ll know where your borrower profile fits best.

»You could also ask the experts here.»

How do I go about in choosing a lender?

Knowing what loan products you can qualify for streamlines your search for a lender. Focus on the ones in your area that cater to the self-employed clientele. You can find them online or through recommendations from family, friends, or colleagues. Be sure to compare rates and fees.

Phase 2: Application

Phase two starts after you’ve selected a lender. Applications can be done in-person, online, or via telephone. It’s highly recommended that you go and fill out the form at the lender’s office. This way, you get to meet the loan officer and ask questions. Applying for a loan is an important step so you need to know exactly what you’re getting into.

On the form, you’ll be required to give information about your annual income, savings, debts, and employment history. Once completed, this is passed along to an underwriter.

Phase 3: Processing

The underwriter is the person responsible for reviewing your application, ensuring that you meet the requirements set forth by the bank or private lender. When needed, you may be requested to provide some type of documentation to substantiate the data on your application form.

Keep in mind that you could qualify for more than one loan type. Thus, it’s best to have all relevant documents ready in case they are needed. These include but are not limited to the following:

  • Federal income tax returns
  • Credit reports
  • Bank statements
  • Documents showing the viability of a business (if applicable)

If your application has passed the review after underwriting, it will then be issued a “Clear-to-Close”.

Phase 4: Closing

The legal transfer of ownership takes place during this phase. This is when you are required to pay for the down payment and other necessary fees that come with the purchase.

»Speak with a reputable lender today.»

Filed Under: Self-Employed Tagged With: self-employed borrower, self-employer borrower requirements, self-employment loans

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