Are you planning to apply for a home loan, but facing problem about your employment status? Apparently, employed individuals can easily get approval for a housing loan as compared to a self-employed. It’s because some lenders think that self-employed individuals like online workers may not have steady income enough to fund the monthly payments.
The good thing is that there are housing loan products designed for self-employed people. All you have to do is to ensure making yourself an attractive loan candidate.
What to expect?
As a self-employed, you should expect for a higher interest rates of housing loan. It’s because lenders may think that you’re not creditworthy. Another factor that lenders may pay attention is the taxable income of the borrower. If the lender notice that you have a lower loan-to-value ratio, most likely you’ll end up with higher down payment.
How to become an attractive candidate?
If you think that your income is sufficient to make the monthly payments, then you can apply for a housing loan. However, as a self-employed you should enhance your chances of getting approval by doing some of the following tips listed below.
- Improve your credit score
Any borrower who has a higher credit score is more attractive candidate for a housing loan. This will also make you qualify for lower interest rates.
- Offer a higher down payment
If you offer a higher down payment, the bank will think that you have sufficient fund for your purchase up front. Thus, lender may not hesitate to approve your home loan application.
- Have sufficient cash reserves
Aside from higher down payment, you need also to show to the bank or lender that you have sufficient cash reserves for emergency. Thus, your monthly payments won’t be affected by any financial restraints.
- Settle all your consumer debts
Paying your consumer debts like car loans and credit cards will make you an attractive borrower. The bank may see that you’ll have enough cash flow to suffice your monthly payment for home mortgage.
- Establish your self-employment track record
Lenders may take a chance of approving your home loan application is they know that you have a stable job and income in spite of being a self-employed. With this, it makes sense establishing your self-employment track record.
Being a self-employed should not be the reason to deny your home loan application. As long as you can prove to the lender that you have the financial capability to make the monthly payments, then you should expect for an approval.