Are all potential borrowers equal in the eyes of banks? Unfortunately, no. Most of us harbor dreams of owning a home. However, when it is time to get a mortgage, the lender will look very closely at where we work, how long we have held the position, and how much we make. That implies that applicants with a consistent employment history (and the W2s to back it up) face better odds than the self-employed. How can people who work for themselves improve their chances of being granted a mortgage? Brian Jahanbin, President of Maxim Lending, Corp, a brokerage firm that allows the self-employed to use 12 months of bank statements to qualify, offers some advice on how to make the process easier.
1. Familiarize yourself with mortgage requirements and know your strengths and weaknesses
No matter your employment background, you can expect a lender to evaluate three factors: your income stability, your credit score (more on that later), and your potential down payment.
“Look at it from a lender’s perspective. They will probably be cautious about self-employed applicants simply because their income is more likely to fluctuate. That’s why it’s very good if you can provide the last year of your bank statements,” Brian Jahanbin explains. “Expected down payments are normally about 20%, so if you can pay more than this, you will look even more attractive to the lender.”
2. Improve – and maintain – your credit score
As always, make sure to keep your bills up to date and to check your credit score at least once a year. Before applying for a mortgage, be sure to review it and address any issues. It takes 7 years before any negative credit history falls off your report. The good news is that by responsibly using your credit, you will see your score begin to rebound within a few months, though it will take time to climb.
3. Come to the brokerage with your financial records organized
Brian Jahanbin recommends that self-employed borrowers develop a system for keeping meticulous records of their income. “It will make it easier for you to pull your bank statements together when you’re ready to talk to us about applying for a mortgage,” he says.
4. Ask as many questions as you need to about the different mortgage types
When you first start learning about mortgages, you will quickly learn that they are not all created equal. Differences are found in the fine print, such as interest rates, the length of the loan, required down payments, and qualification requirements.
“As you are self-employed, your financial situation is unique. You will probably be most interested in bank statement loans, which are more flexible than mortgages that require tax returns as proof of income,” Brian Jahanbin advises.
5. Bring along some “nice to haves” to your meeting with a brokerage
If you are a self-employed mortgage applicant, it can’t hurt to present your company’s business plan, including financial projections, history, and growth potential. These extras will highlight your professionalism as a business owner and provide further evidence of income stability.
Some final advice for would-be homeowners who are self-employed
“Be patient and persistent, and above all, never assume that being self-employed means that you can’t qualify for a home loan,” Brian Jahanbin recommends. “With millions of people across the United States who work for themselves, lenders understand that there is not a one-size-fits-all mortgage. Just come with twelve months of your bank statements. At Maxim Lending, Corp, we’ll take care of the rest.”
Maxim Lending, Corp is a full-service brokerage firm founded by President Brian Jahanbin. It assists loan applicants nationwide, is licensed in multiple states, and offers conventional, FHA, VA, jumbo, hard money, and NQM loans.
For more information about Maxim Lending, Corp and its loans for investment properties and for borrowers with credit scores as low as 500, please visit www.maximlending.net or contact:
Brian Jahanbin
Maxim Lending, Corp
1-888-345-9333
marketing@maximlending.net
