Self Employed Mortgage
With the housing crisis, getting a mortgage broker for self employed individuals has become more difficult. Those who work for themselves and apply for a mortgage are confronted with a much more strenuous process than in previous years. Self employed mortgage brokers are simply harder to get. However, with hard work, a solid loan application and a good lender, it can be done.
What makes self-employed individuals different?
Before we get into the how, let’s talk about the why. Why is it so difficult to secure self employed mortgage brokers? Unlike traditionally employed individuals, those who work for themselves do not receive regular pay, nor do they get a printed T4 at the end of the year. While they might be making really good money, their income is best described as ‘inconsistent.’ When you work for yourself, the only thing for certain is that nothing’s for certain. For this reason, many of the major financial institutions consider self-employed individuals too risky to qualify.
What to Expect
As someone who is self-employed, mortgage brokers may not see you as the ideal borrower. Expect to pay higher interest rates than the ones commonly advertised on mortgage websites; those rates are for prime borrowers, or borrowers who are considered to be particularly creditworthy because of their steady, verifiable incomes and excellent credit scores. Similarly, because you may be a less attractive candidate, you might have a reduced ability to shop around and negotiate a lower interest rate, using a mortgage broker for self employed people will ease this worry.
Another problem you may encounter is that if you’ve used lots of business expenses to reduce your taxable income on your tax returns, lenders may wonder if you make enough money to afford a home. Finally, banks may want to see a lower loan-to-value ratio (LTV ratio), meaning that you’ll need to come up with a larger down payment.
How to Secure a Mortgage
Self employed mortgage brokers want to make sure that you are a viable candidate for a mortgage. They need to know that you can make your payments, no matter what business is like. While it’s the job of the lender to carefully assess the risk involved in lending to individual clients, it’s the job of the individual to lessen that risk. It is your responsibility to show the lender that you are a desirable candidate. Here’s what you’ll need to provide in order to secure a mortgage:
Proof of Income
Most Mortgage Broker for self employed individuals will require you to have 2 years of steady income prior to applying. You will be asked to provide a two-year average of Line 150 on your tax return. While small business owners claim expenses, which can make their income appear lower, a good lender will take this into consideration.
An Excellent Credit History
A good credit score will get you far – an excellent score will get you even farther. Make sure that in the months leading up your visit to the lender that you keep on top of all of your finances. Don’t miss a payment and lower your personal debt. Doing so will increase your chances of securing a mortgage at a good rate.
Other Paperwork, Including HST Returns and Business Registration
Keep a file of important documents on hand in case your lender needs to see them. Make copies, if necessary.
A Hefty Down Payment
While 5% is usually acceptable for the traditionally employed, you can expect to put at least 10% – and as high as 20% – down. Know that some of that money can be gifted, though.
One more thing to consider is the location of your business. Some self employed mortgage brokers prefer to give money to business owners whose place of work is located near a busy, urban center. It is thought that the location of your business helps to determine whether or not it will be busy year round.
While the journey to home ownership can be tough at times, it’s certainly not impossible. Call around and speak with a mortgage specialist. They’ll tell you everything you need to do to prepare. The more you prepare yourself ahead of time the more desirable you’ll be in the eyes of the lender.
For more information on a self employed mortgage or for a free consultation contact the GLM Mortgage Group.
What is the GLM Mortgage Group?
GLM Mortgage Group, powered by Dominion Lending Centres, is your Vancouver and Lower Mainland Mortgage Brokerage service. We are always ready to move forward with you to obtain the mortgage you need with the sharpest mortgage rate available. Whether it’s a fixed rate or variable rate mortgage you are after, we are dedicated to finding the best mortgage rates in Vancouver, including Home Loans, Consolidation Loans, Lines of Credit and more. No matter what you need, our team of Mortgage Specialists will follow through to find the best mortgage product that fits your individual circumstances. Our free online mortgage calculator keeps you informed on how much your mortgage payment will be as well as show how different mortgage rates will affect the mortgage you require.As your Vancouver mortgage broker, GLM Mortgage is committed to clear communication with our clients. We make sure you are informed on all the mortgage options available to you. We call you back within 90 minutes to make sure that you have the fastest service available. We are not only available in Vancouver and the Lower Mainland, we are also available across Canada.GLM Mortgage Group is your Vancouver mortgage specialist. With over 22 years of experience in the investment industry we know how to wade through the challenging process of getting a mortgage. We provide smarter options to putting your mortgage in place. We know how important it is to have an experienced professional Mortgage Specialist available to walk through your mortgage experience and stay with you through to the very end.We get you a fast “YES” at the sharpest rate… guaranteed! Call us now so that you can get that mortgage you’ve been waiting for. We already have been working for you, making sure that you will have every option of a mortgage available to you. GLM Mortgage Group is on call for you!