There are plenty of reason why you would want to get a loan if you are self-employed. Probably, you could be trying to get a loan for your business or applying for a LBC mortgage. Regardless, what most lenders look for is your current employment. The unfortunate thing is that self-employment doesn’t look as good as a steady job. Getting a loan isn’t impossible, however its best to plan ahead.
This guide will explore a few basic tips to help you get approved for a loan if you are self-employed.
Clear Any Current Debts
If you are looking to get a business loan, you should work on paying off any business debts. If it is a personal loan, clear your personal debt. Any outstanding debt is a negative indicator to a self-employed home loans company. If it proves impossible to clear off your debt you should pay them down as best as possible. This planning process should be done months earlier.
Be In Business For At Least Two Years
You’ll hardly get a loan from any local stated income loans office if you have not been in business for two years. Most lenders would like to see a two-year tax return proof. They will use this information to evaluate the amount they can credit you. Even if your business has recently seen a significant rise in revenue, this might not show on your tax returns. Also, lenders hardly consider your client’s contract showing guaranteed income in the near future before approving you for a loan.
Build-Up Your Cash Reserves
It’s important that you build-up your cash reserve especially if you haven’t been in business for more than two years. Your cash reserve will show the lenders that you can pay your loan even if the business starts to fall. Generally, cash reserves are designed as back-ups incase of issues down the road.
When applying for a mortgage, lenders will classify you as self-employed or wage earner employee. If you own a stake in a business and already employed, you can be considered self-employed. Getting a stated income home loan is not as easy as other conventional loans. That said, understanding the rules of engagement make it easier for you to make an informed decision.
Stated-income mortgage allow anyone applying for a loan to qualify based on non-standard income documentation. While most lenders would want to see your tax returns, local stated income loans office can process your loan based on your overall cash flow, home equity and available assets. This makes it convenient to get a home loan if you rely on seasonal commissions or you are self employed.
When scouting for a Self Employed Home Loans company, understand that not all of them are the same. There are those that will add specific expenses to your net income when calculating the income-debt-ratio. For example, a large one-time licensing fee can shift the debt to income ratio which acts to your advantage. The trick here is to find a mortgage experts who understands your business model and finances so that they can connect you to the right lender.
