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Tips For Getting A Mortgage When You'Re Self-Employed

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The mortgage application process for homes for sale often seems like it's designed for employees. The fill-in blanks always ask for one's employer, supervisor's signature, and other employment-related information. If you're self-employed, applying for a mortgage is not as straightforward as filling in these common forms. However, you should not assume that means you can't apply and qualify for a mortgage as a self-employed person. Follow these tips to apply for a mortgage and land the home of your dreams.

Call the lender and specifically ask to apply as a self-employed individual.

Many banks have standard applications that they give to conventionally employed individuals. They probably also have applications for self-employed people, but you may have to ask for them since they're a less common resource. Instead of filling out an application for employed people and risking it being looked over because you don't have the right "answers", ask the bank specifically what you need to do, and then follow their instructions.

Have documentation ready.

As a self-employed person, you don't have a boss or HR manager the bank can call to verify your income and the stability of your position. You'll need to prove your financial situation yourself. The best way to do this is by providing your last two years' tax returns. You should also be prepared to provide statements from any business and personal bank accounts you have.

Apply at several types of lenders.

Some banks see self-employed people as being higher-risk borrowers than conventionally employed individuals. Others assign the same risk value to self-employed people as long as you can prove you have a stable income. To ensure you get the best rate possible, it's a good idea to apply to a few different types of lenders. Apply to one big bank, a smaller local bank, and a credit union or two. Then, you can compare rates and choose the best one, rather than hoping the bank you choose offers you a decent deal. Note that some banks may choose not to lend to self-employed people altogether. Don't let you discourage you; there are certainly other lenders in your area who will give you a loan at a good rate.

Be reasonable in your loan amount.

Since your income may be more volatile as a self-employed person, and the lenders know this, it's best to buy a home on the lower end of what you can afford. For instance, you'll have an easier time getting approved for a mortgage of $100,000 than one for $150,000, even if you could afford the $150,000 home.