Self-Employed AND having trouble finding a mortgage lender – you’re not alone
Self-employed life certainly has its perks but also has its disadvantages. Buying a home (or refinancing your mortgage) can very quickly highlight the disadvantages of self-generated income. Dealing with banks means supplying a lot of paperwork and fitting it into a very specific box.
Your business may be complicated and thus your paperwork may not be exactly what your bank is looking for to fit you into that “box”. Proving your income as a self-employed person can be a pretty big barrier that your bank won’t be willing to cross. If you’re self-employed and you need a mortgage, here’s what you need to do.
Use a mortgage broker
Using a mortgage broker experienced in financing self-employed clients can save you a lot of anguish. You’ll also save time by dealing directly with a professional. A broker will have access to lenders who will be used to lending to self-employed borrowers. Veteran mortgage brokers possess a combination of experience and connections in the world of home equity lending. As a result, brokers know what mortgage lenders will ask for in advance. If it will be difficult for you to provide some of the required documents a lender will request, your broker will find another.
Together, you will work to find a lender that will be forgiving of your circumstances, willing to make an exception, or flexible enough to find another way of proving what you are trying to show them on your application.
Address the income tax problem
Using write-offs to lower your income is an effective way of saving on paying income tax. If you’re applying for a mortgage, paying less income tax can be a trade-off for qualifying at the bank. Major Banks and their respective insurers want to make sure that you can afford to make your monthly mortgage payments. If your budget doesn’t demonstrate enough cash flow to cover your bills, it’s harder to convince a lender that you won’t default if they agree to lend to you. If your income tax statements (notices of assessment) say that you don’t make enough money to qualify, your bank won’t be able to approve your application.
A good mortgage broker understands and can analyze how you can utilize your write-offs to qualify for financing. Just because you have taken advantage of a tax reduction does not mean that you shouldn’t be approved for a loan. We’re here to ensure that you get a fair chance to explain your income situation and prove your ability to manage the repayment schedule your loan will require.
Side Note: Inconsistent Income
Not only does your tax assessment make it challenging, but the flow of your work can also impact a lender’s decision. Sure, it can be hard to prove your self-employed income, but it can also be hard to prove consistency. When you are applying as a self-employed borrower, most financial institutions want to see consistent income. The bank may not lend to you if you can’t show them several years of income that have not fluctuated.
For many self-employed people, income fluctuations are pretty normal and worked into the “financial plan”. A business can have years where it earns exceptional income just as easily as it can have years where it barely survives. An experienced mortgage broker can help you bridge the gap between your most lucrative years and your less productive ones. We all have ups and downs in our lives. If your business is currently experiencing a slump it does not mean that you can’t get the funding you’re looking for.
Refinance to get back on track
In fact, sometimes a home equity loan is exactly what a self-employed person needs to get back on track and restructure their affairs. If business hasn’t been good lately and your income could use a little boost, your home equity could help. Reaching out to refinance in a time of need can be exactly what you need to get back on track. Even the most successful businesses in the world will restructure when required. Being self-employed can be a roller-coaster ride at the best of times and there are lenders out there who understand this.
With a mortgage broker looking for the right lender for your needs, you can make a home equity loan work for you. Get a loan to help you avoid bankruptcy by paying off high-interest debt. Borrow so that you can invest in your business to see an immediate increase in cash flow and profitability, or simply cover the bills while waiting for your next big contract to come in.
Choose alternative lending
If you’ve been turned down by your bank, fortunately, there are a lot of alternative lending institutions. Some of these lenders are in direct competition with the major banks. The reason your bank turned you away may be nothing more than a minor transgression in the eyes of a competitor.
With a mortgage broker guiding you it will be easy to select a lender who fits your story. Your broker will know who these lenders are and what they will need to approve you. Your mortgage broker will also know how to get you in touch with lenders quickly to save time. Alternative lenders are the alternative to major banks and the alternative to a declined mortgage application. If your income won’t fit with your bank’s expectations, skip the rejection and get a broker right away.
Let’s get started today…
Perhaps you are a self-employed entrepreneur looking to get a secured line of credit. You could be a server or bartender who can’t prove their tips. Even if you run a well-established self-employed business and are looking to create liquidity for cash-flow purposes, we can help. Get started with your alternative financing plan today. Whatever the reason for your borrowing needs, the funds can be yours with the right assistance.
We don’t turn anyone away based on income challenges alone! We will hear your story, and make sure that we clearly understand your income situation. We’ll also make sure we fully understand your mortgage needs – and then we’ll shop for a lender to suit them. Stop worrying about jumping through hoops and supplying extra paperwork, let an expert handle your next mortgage.