How To Secure A Mortgage When You’re Self-Employed

There are many advantages to being self-employed, but one disadvantage is that it is much more difficult to prove your income to financial institutions. It gets especially complicated when your income is much less on paper than it actually is— especially when you factor in the deductions made from business expenses. Recent rule changes have made it much more difficult for self-employed workers to qualify for a loan, but if you are self employed, there are ways to increase your chances of successfully securing a loan.

Have A Good Credit Score

Although it is not the only requirement for securing a mortgage, it is still critical. If you know your credit score is low, try to improve your score before approaching the bank, because it is one of the first things they will look at.

Keep Your Business Books

Keep track of your financial records. Practise good bookkeeping and keep your receipts handy. The lender will want to see the progress of the business over a period of time and ascertain its value. It is also important to show regular bank statements to show your income.

Be Prepared To Discuss Your Business

The lender will want to know the nature of your business—especially the financial aspect. Know the business’ income and expenses and how much it is worth or projected to be worth.

Write Off Fewer Expenses

While writing off as many expenses as possible has been the traditional way for business owners to lower their taxes, they may also end up qualifying for a smaller loan. Before you apply for a mortgage, reduce the number of expenses you write off. You may end up paying more in taxes but you will find it easier to secure a mortgage at the amount you want.

Pay Yourself A Salary

It might be easier to treat yourself as an employee in your own business and simply pay yourself a salary. The banks may be more inclined to treat you as a salaried employee rather than a business owner.

Being self-employed is quite rewarding, and with a little planning and forethought, it doesn’t have to inhibit you from accessing a mortgage. The more information you can provide to the lender about the finances and operations of your business, the easier it is to secure a mortgage that is right for you. At Northwood Mortgage, our specialists can help you as a self-employed person to secure the best available mortgages. Give us a call today and book a free consultation.

source: northwoodmortgage.com

Mortgage PreApproval Benefits [Video]

Getting a Mortgage Pre-Approval is your first step in obtaining a mortgage. In this video, Northwood Mortgage agents Jason Hollingworth and David Steinfeld explain what a Mortgage PreApproval is, how to get one, and why it’s beneficial.

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source: northwoodmortgage.com

How Student Loans Can Affect Your Mortgage Application

The latest figures show that almost $30 billion is owed by Canadian students in student debt. With many people going back to school in their adult years, this increasing level of student debt brings with it numerous challenges for the average Canadian student. This is clear when examining how student loans can impact your ability to buy or sell a home. And so within this article, we’ll look at how student loans might impact a buyer during their mortgage application process.

Your Debt to Income Ratio

When buying a home, your lender will calculate your debt to income ratio by adding up your monthly payments, along with your expected mortgage, and dividing the total by your monthly income. To qualify for a loan with most companies, your debt-to-income level should be less than 43%. For those with a $20,000 student loan looking to buy a house for $300,000 or more, this debt-to-income ratio could prevent lender approval.

You May Need a Higher Down Payment

In order to decrease their mortgage amount, and thus the amount they’ll be comparing with their income, buyers might consider using a higher down payment for their property. This might mean waiting a little longer to buy their dream home or selling another asset such as a business or a vehicle in order to increase their down payment amount.

Options to Decrease Mortgage Application Challenges

While student debt can have a significant impact on the mortgage application process, buyers do have numerous options available to help overcome these challenges. Let’s look at several steps buyers can take to mitigate the impact student debt has on their mortgage application:

• Consolidate Loans Into One

For those with numerous loans in addition to their student loan, such as a credit card, it can help to consolidate the loan into one loan repayment. This can reduce the overall cost thereby reducing the debt to income level for the mortgage applicant.

• Choose a Longer-Term Mortgage

Another way a person with student debt can reduce their long-term debt to income ratios is to choose a longer mortgage term. This will provide a longer period to pay off the mortgage, thereby decreasing month-to-month costs.

It’s important not to let student debt prevent you from moving forward on your home purchase! There are multiple avenues towards buying a new home for those with student debt. To learn more, speak with our trusted experts directly today.

source: northwoodmortgage.com

What Income Verification Methods Are Required When Applying For A Mortgage?

When applying for a mortgage, you will need to demonstrate to a lender that you have a substantial enough income to pay off the mortgage in the future. But how exactly can you reasonably prove your income? This article will detail the methods you can use to verify your income to a mortgage lender.

 Make Copies of your Records

The first step is to provide your lender with copies of your records that indicate your income. This means your two most recent pay stubs, your most recent checking account statement, your current savings account statement, and your federal income tax returns from the previous two years. This should provide your lender with enough information to accurately gauge your income and financial situations.

Debt and Loan Statements

Your income will not be the only factor that your lender will want to verify. Your mortgage lender will want to know about any debt obligations you have. As such, you should provide your lender with copies of your most recent credit card balance(s) as well as the most recent statements from any other outstanding loans you have, such as personal, auto, or student.

Provide Employer Information

Your lender may also request that you send them the information of your employer. This includes your employer’s name, your office or work address, and the phone number to the human resources department. Your lender might want to call to enquire about and verify how long you have worked there and what your salary is.

If you have Unverifiable Work

Many people who apply for mortgages have not been in steady employ in recent years. This can make getting a mortgage more difficult, but by no means impossible. If you have been in and out of work, have been working as a freelancer, or are self-employed, then you will have to take some extra measures to demonstrate your income. This usually means providing your lender with copies of more years’ tax returns, such as four or five. You may also want to provide bank statements going back several months or years.

Most Importantly, Be Honest

Remember, while it may be tempting to try to exaggerate your income in order to impress your prospective lender, this will ultimately only hurt you. Any competent and ethical lender doesn’t want to give you a mortgage you can’t repay and drown you in debt. Financial honesty and responsibility are always prudent.

source: northwoodmortgage.com