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

Is There an Age Limit to Qualify for a Mortgage?

Many people are under the impression that once you reach a certain age, you won’t be able to qualify for a mortgage. Although there is some logic tied to that myth, it doesn’t make it true.

 In fact, as long as you’re a legal adult (over the age of 18), it’s illegal for a mortgage lender to decline you based on your age—regardless of being 21, 60, or 99-years-old, you can’t be denied a mortgage because of your age.

But this isn’t to say that mortgage lenders are obligated to offer you a loan. Even if you’re in the prime of your life, you’ll have to prove to your lender that you can afford your mortgage and that the odds of you going into foreclosure are slim.

Here are the factors that lenders do look at:

Debt to Income Ratios
Most lenders expect that your total monthly debts will equal no more than 36 percent of your gross income. This includes credit card payments, student loans, and of course, your estimated mortgage payments.

For this reason, it’s most beneficial to pay off the rest of your debts before you apply for a mortgage. It will greatly increase your chances of securing the mortgage you need.

Income

Mortgage lenders also want your mortgage to take less than 28 percent of your monthly income. In other words, the more money you’re bringing in per month—the more likely you are to get approved for a mortgage loan.

This is where age can make a difference. Not necessarily in terms of the chances of you getting a loan, but rather, when it comes to what income you’re including.

For most people between the ages of 20-50, the majority of their monthly income will come from their employee salary. On the flipside, many people retire in their 50s and 60s, after which their income will mainly be comprised of pension payments, high interest savings incomes, investment incomes, and other sources.

Credit Rate
No matter how old you are, the most important part of your mortgage payment is going to be your credit score. As is the case with any loan, the higher your credit score, the more credit you’ll be able to secure. Most mortgage lenders consider anything above around 740 to be a good credit score.

If you’re currently falling below that, try to increase your score as much as possible before applying for a loan. You can do this buy using credit, and making regular large payments to bring down your debt at a favorable rate.

source: northwoodmortgage.com