Getting a mortgage approved by the lender (agency, bank, or otherwise) takes a long, and sometimes tedious, process. This gets even harder if you are applying for a mortgage as a self-employed individual but, it isn’t impossible. The question is, how can you increase your chances of getting a mortgage? Read on for answers!
1. Save up for down payment
The point of a mortgage is to support your savings but you need to remember that the lender will be more favorable to an application that shows a higher sum of savings because it reduces their risk. Try to get as much of the initial capital as you can before applying. This convinces the lender that you are not a loan-risk and are capable of handling the financial responsibility.
2. Have a financial safety net
It is also advisable to have some savings set aside to help in case of emergency, delayed returns on your business, or anything else that may affect your consistency in paying back the mortgage. With secured savings, you can assure the lender that being self-employed will not affect your accountability in terms of paying back the mortgage, as agreed.
3. Clear your debt
If you are paying back debts in any way or to any source, it automatically affects your bottom-line income and that may affect your mortgage payment, which is an occurrence that lenders try to avoid. Clear up as much of your outstanding debt as you can before putting in your application.
4. Improve your credit score
Your spending habits versus your income determine your financial responsibility and your credit score is proof of that. A high credit score shows that you are diligent with your bills. Every lender wants to minimize the risk of mortgage and so, they opt for applicants with higher credit scores. If your credit score isn’t so strong, you may want to take some time to boost it up before trying to get a mortgage.
5. Build your backstory
Applying for a mortgage as a self-employed individual puts you in a very difficult category, especially if your business is young. A business that’s been up and running for less than two years may not be as reliable as a business that’s been in operations for over two years. So, if you have the time and resources to wait until your business is old enough to be credible, then wait before applying.
In these tips, one thing remains constant; you have to be truly ready and committed before you consider getting a mortgage. During the application, ensure that you are as prepared as can be, dot your i’s and cross your t’s. It is not impossible; you just have to be willing to put in the work.