Our country has seen rapid growth in self-employment because of a variety of reasons. When you are self-employed, you enjoy more freedom, you have a more flexible time schedule and compensation is just as high as regular work or sometimes even higher. It’s no wonder more and more people are taking this route. It is true that self-employed people such as freelancers, contract workers and part-time workers enjoy a multitude of benefits because of the nature of their job. However, getting a mortgage is not one of its perks.
One of the most common issues for the self employed getting a mortgage is proving that they are capable of paying the mortgage. Because it is more difficult to prove one’s income when you’re self-employed, many lenders prefer to lend money to people who have stable and regular work and income. Therefore, even if self-employed people earn as much or sometimes even more than regular employees do, it is more difficult for them to get a mortgage.
Even if they do get a mortgage, self-employed people are charged with higher interest rates or higher monthly payments because they are seen to be a higher risk than regularly employees are. It is a sad reality that even though self-employment is a good source of income, lenders do not see them as financially stable.
Fortunately, over the recent years, many lenders start to realize this fact and with a good turn of events, mortgages for the self-employed have been created to cater specifically to all freelancers, part-time and contract workers, and even people who have irregular income. Mortgages for the self-employed seek to provide these people with finances to help them buy their dream homes or purchase some properties.
Although relatively different from the traditional mortgage, this also entails careful thought and planning. Mortgage Brokers and AdvisorsIf you are self-employed and intends to get a mortgage, using a self-employed specialist mortgage broker is one of your best options since brokers have access to a wide range of lenders who offer this type of mortgage. Aside from that, there are some mortgages for the self-employed deals that are only available to borrowers who have brokers and some lenders only deal with intermediaries. It is also very convenient and time-saving because a broker will be the one to do most of the legwork.
A mortgage advisor will also prove to be helpful because he or she will be able to provide you with impartial and practical financial advice that will enable you to make an informed decision in your mortgage dealings. Proving your IncomeIt is true that people who work as regular employees generally find it easier to secure standard mortgages than those who are self-employed. And one of the main reasons for this is that it is more difficult for self-employed people to prove their income.
While it’s very easy for regular workers to produce official documents such as pay slips or audited accounts, self-employed people do not have this. But there are some ways prove your income when you’re self-employed. One is through self-certification. In self-certification mortgage, you declare what you earn without needing to show proof of income. You can also prove your income by presenting audited accounts from a credible accountant, tax returns, monthly receipts, housing payment history, or bank account statements.
Contrary to what some people believe, proving your income when self-employed is not an impossible task. Amount Offered by Mortgages for the Self-employedThe amount you can borrow depends on your income and how much the property you intend to buy costs. While standard mortgages can lend as much as 95%, mortgages for the self-employed may only give up to 75% of the purchase price and require a significant amount of money. Interest rates are also much higher because of the high risk involved in this type of mortgage.
Tips on Getting a Self-employed MortgageBuild your credit history.A self-employed person with good credit report is more likely to get a mortgage than one who has bad credit history. Be sure you don’t miss any deadlines and pay bills on time. Make sure you hire a reliable broker.
A self-employed specialist broker is the better choice because he or she will be more knowledgeable on the rudiments of self-employed mortgages and lenders who can offer this type of mortgage. Shop for the best deal. As with standard mortgages, you also need to make sure you choose the best mortgage quote. Do not stop with the first lender you see. Search the whole market so you can be sure to end up with the best deal. Consider a flexible mortgage.
Keep in mind that you have a fluctuating income so a flexible mortgage can be a good option for you. This permits underpayments and overpayments depending on your monthly income. Don’t lie. It is illegal to overstate your income on a mortgage application form. It is already a challenging feat to borrow money because you are self-employed, by not being fully honest, you are going to make things even harder for you in the future. How can lenders trust you to repay when they cannot trust you to tell the truth? Borrow only what you can pay.Do not borrow money that is beyond what you can afford to repay. This is a risk not worth taking.
Mortgage crisis affecting the self-employed
Only recently, there have been some crises in the mortgage world and possibilities of an economic recession, which can greatly affect a multitude of people, including those who are self-employed. Because of fears of economic fall, lenders may view self-employed people as extremely high risk in a time when the economy is not stable. It is a good thing that there are still many open minded lenders who are willing to lend money for people who are self-employed.
Keep in mind that it is not impossible to get a mortgage when you are self-employed. You just have to know where to look and what to look for so you end up with nothing short of the best mortgage deal there is.
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