It may be easier getting mortgage finance as a regular employee but that does not mean that home loan or mortgages are not open to the self employed borrowers. There is no need running back to the cubicle to get approved for even a second mortgage.
Concern of Lenders
Lending group or individual lender would be concerned about certain factors in case of self employed borrower.Self employed borrowers may not have strictly regular source of income.In such case the surety of the monthly payments becomes questionable.Many lenders do not like the extra paper works involved in sanctioning mortgages in favor of self employed borrowers.
Factors for Consideration
Self employed borrowers need not lose heart since a few steps can ensure that they will be able to attract the best lenders. But they should also take note of the following factors.Usually self employed borrowers should be ready to pay higher interest rates.These rates would be higher in comparison to those advised on mortgaged websites.Advertised rates are for prime borrowers or those who are considered creditworthy by the prospective lenders.Reason is that such people have steady income source and have better ability to repay the loans in time.People with good credit scores and FICO scores are also preferred by the lenders.Self employed borrowers will have less ability for shopping around to get the mortgage loans.
Task for the Borrower
Task for the borrower is therefore cut out at finding a willing mortgage lender who would offer best mortgage at least at the prevailing mortgage rates and without charging exorbitantly high interest rates. Of course for most of the financiers the proposition would feature lower loan-to-value or LTV ratio but this can be compensated with higher down payments. At the same time the borrower should be ready to accept harder terms and conditions put by the mortgage lender for sanctioning the loan.
What the Borrowers Have to Provide
For getting the mortgage loans the self employed borrower should provide Stated income or state asset mortgage where the bank does not seek to verify the income stated by the borrower.However banks or financiers will verify the sources of income. IRS form 4506 for tax returns directly from IRS or 8821 authorizing them to go to IRS office to verify the forms submitted may also be requisitioned by them.Some banks offer no documentation loans or Alt-A mortgages are good solutions for self employed borrowers.At times lender may require profit and loss statement and balance sheet of business to be provided but that is also because they consider the self employed borrower greater risks in comparison to fixed income borrowers.
So provide whatever the lender asks for within your capabilities and get approved.