For the SELF-EMPLOYED…how to get the mortgage you want
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.
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