The self-employed make up a significant part of the US labor market — statistics from the Pew Research Center show that they make up about 10% of the working population. But while individuals who are self-employed earn a good living, one problem they may encounter is qualifying for a home loan.
Mortgage lenders like Primary Residential Mortgage, Inc., believe that there are ways to make someone a more attractive loan candidate, and it all boils down to proving your financial worth and commitment to staying on top of your monthly mortgage payments.
Clean Up Your Finances
In the years leading up to your purchase of a home, make it a point to write off fewer expenses and to separate your business and personal finances. Use a business credit card for a new laptop, for instance, as some lenders may not count the debt against you since it belongs to the business.
Have a Significant Amount of Cash on Hand
Offering a large down payment on home purchase will cement your reputation as a credible borrower who won’t walk away from the loan even during times of financial strain. Additionally, keep a huge stash of money in an emergency fund to assure lenders you can still be counted on to pay monthly payments even if your business takes a nosedive.
Clear Up all Personal Debts
Make it a goal to eliminate monthly debt payments — it will, after all, be easier for you to pay your mortgage. By paying off your loans, you could even have the chance of qualifying for a larger loan because you’ll have more cash flow.
Maintain a Good Track Record of Self-Employment
Once lenders see that you know how to handle the self-employment game, you’ll easily endear yourself to your lender. Prove how stable your business is by showing lenders year-over-year income increases. Moreover, make sure you document your income through former tax returns and profit and loss statements.
Improve your chance of taking out a loan by establishing your record of self-employment record and having significant cash reserves. This way, you’ll have your own home that you can work as a self-employed worker as well.