Mortgage approval rates for self employed persons are on the decline because fewer lenders are willing to give mortgages to people without a guaranteed source of income. Lenders prefer to give these types of loans to people who can prove consistent gainful employment, or have successfully applied for a mortgage in the past. If you are self-employed and looking to get your home, this might prove to be a challenge.
Self-employed people can still get mortgages even with the strict checks put up against them. If you are self-employed and you are considering making a mortgage application, you can improve your chances of success by creating a detailed and accurate application. Here are some tips to help you make your application more appealing to the lender.
The biggest concern for lenders over self employed people is their ability to consistently make repayments on their loans. Most applications are rejected because borrowers do not detail their revenues or incomes over a sufficient amount of time. Unlike the case for regular employment, where a steady income can be used to create a repayment plan, lenders are left unsatisfied by the applicant’s ability to make repayments on the mortgage. In most cases, this will result in rejections. When making your application for a mortgage, you should provide a detailed breakdown of your business’ performance over a long amount of time. The revenue and expenditure levels will help lenders understand that you can satisfy your loan repayments, and improve your standing with them.
Your credit score is just as important as your ability to make repayments. Lenders usually have a minimum credit score requirement for potential clients, which help to ensure that only borrowers with a history of good debt repayment can access the loans. Most self employed people take loans to grow their business. Before making your mortgage application, you should check into your credit score to make sure it meets the requirements. It is advisable to keep your business and yourself as separate entities when making financial decisions since they might affect your credit rating. Any loans taken out in your name, even when they are used for your business, should be cleared before making the application.
You should consult an accountant before making your application. Your accountant will help break down your business’ numbers in a way that would be easy for you to understand. Lenders will reject mortgage applications because the self-employed applicant is under informed about aspects of their business performance or market trends. Professional help will guide your understanding, which could impact your application’s performance.
You could also consider professional overview by a mortgage broker. They provide agency services as well as provision of information. having a mortgage broker represent you will increase your chances of getting a mortgage, and doing so at a great price. As a representative, they could help you secure your application. In a reduced role, they could help remove any administrative errors and make sure that your application is up to expected standard.