Nearly nine million self-employed individuals make up the job market in the United States, yet only a fraction of these workers can get financing for a home loan. It is not that lenders absolutely refuse to make an agreement with entrepreneurs: instability causes delay.
Self-employed individuals tend to have irregular incomes that rise and fall with the times. Unfortunately for business owners hoping to one day be home owners, banks put more weight on the possibility of income falling thank rising when approving loans. So what is a self-employed person such as yourself to do in terms of obtaining a home loan? Here are a few tips.
You know that you will have a battle with the bank so do your research and start shopping for loans in advance. Ensure that your efforts are not in vain by having two years’ worth of tax returns along with bank statements on hand. These will be the first documents financial institutions ask for when determining how much you can afford.
Come With Good Credit
Anyone hoping to become a homeowner should strive for excellent credit. Scores above 740 are ideal as they come with the best rates. Self-employed borrowers should have no less than a 640 credit score.
Sometimes, regardless of how prepared you are and how great your score is, the financial institution you hope will say “yes” will answer in the negative. Don’t lose heart but rather take interest in other options. Consider asking a family member or friend to co-sign your loan, and be willing to put down more than the standard twenty percent.
It is also a good idea to take into account the “alternative income verification loan” that only uses bank statements to determine cash flow. This type of financing is especially ideal if you take full advantage of tax deductions as such discounts lower net income on the 1040 form.
When you are looking to buy and sell in Pittsburgh, consider Caymus Realty Solutions. We pay cash for houses, and offer fair market value for owners looking to sell. Learn more about our services here.