Applying for a Mortgage:

Challenges for Self-Employed

Buyers

City Creek Mortgage

11910 South State Street,

Suite 100 Draper,

UT 84020

801.501.7950

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When it comes to mortgage application, self-employment makes the process more complicated. As self-employed individuals do not receive a regular paycheck, lending companies consider them as high risk. While it is not impossible to get a home loan when self-employed, it involves advanced planning and longer preparation.

Not the True Income

Although many self-employed individuals earn a good living, they find it hard to qualify for home

loans. Borrowers usually need to provide two years worth of tax returns, which do not accurately

reflect their true income. This is because when loan underwriters use tax return as proof of income,

they actually see deducted tax expenses. They see much lower figures than what the person actually

takes home. This could decrease the amount that the buyer can qualify for, or result in rejection.

Longer Preparation

Mortgage lenders recommend preparing longer than most buyers do before purchasing a home.

Self-employed buyers can benefit from cleaning up their financial affairs so that their business will

not mix with their personal funds. It is also best to provide mortgage lenders with solid references or

people who can guarantee their financial stability.

Good Credit Score

A solid credit score is always important when applying for a home loan, but even more so for self-

employed buyers. A good score reflects how the person manages personal finances, which is

important in becoming an ideal mortgage candidate. If the borrowers credit score is not in great

shape, it is best to wait to get it back on track.

More Money Down

To win the approval of the mortgage lender, self-

employed buyers need to put more money down.

The chances will be higher by paying at least 20 per

cent or more in the down payment. It is also

advisable to look for properties that do not have

extra payment for things such as maintenance and a

homeowners association.

Self-employed individuals who are considering

buying a home need to talk to trusted lenders to

know the options available and preparations needed.

While it is possible to get a mortgage, it still

important to fully understand the application process

and requirements to avoid surprises.

RESOURCES:

CityCreekMortgage -

http://www.citycreekmortgage.com

Usnews.com

http://money.usnews.com/money/personal-finance/articles/2013/01/15/how-to-play-the-

mortgage-game-if-youre-self-employed

MortgageCalculator.com

http://www.mortgagecalculator.org/helpful-advice/mortgage-qualifications.php