Many people are self-employed. This means that they may be relying on their income to apply for a home loan. Although it is true that self-employed people may have more difficulties getting approved for a mortgage than someone with a traditional W2 income, these obstacles can be overcome.
Even self-employed first-time homebuyers should be able qualify for the loan they need with the right documentation and qualifications.
Brokers Evaluate Someone’s Capability To Repay the Loan
Lenders want to ensure that the borrower can repay the loan. Beverly Hills Mortgage Brokers believes that someone with a W2 income is more likely to repay the loan. However, someone who works for themselves can show that they are able to repay the loan.
Individuals who are self-employed can use tax returns and payroll receipts as well as records from financial institutions to document their income and assets. Standard W2 forms and pay slips may no longer be required.
Eligibility Requirements
The eligibility requirements must be met by self-employed people.
These include two years of self-employment, reliable income, strong credit scores with a clean credit history, cash for a downpayment, and a low ratio of debt to income. A first-time homebuyer can get a loan with less than five percent down. However, closing costs may be high.
To get approved for a home loan, first-time buyers should budget to spend close to five per cent of their home’s actual value.
Understanding Mortgage Options
Self-employed homebuyers who are first-time buyers should know that there are many loan options. There are FHA loans and VA loans available for those who meet the requirements. USDA loans and jumbo loan might also be options. You also have bank statement mortgages as well as conventional options.
Individuals who are self-employed may need to visit multiple programs in order to find the one that works best for them. There are many options available for individuals looking to make a down payment and meet minimum credit scores.
A professional loan officer with experience in helping first-time homebuyers, whether self-employed or not, is a wise choice.