MA Property Management: Self-Employed Borrowers Guide
It can be a pain for self-employed people to borrow to buy a home as lenders tend not to approve of them so much. The chances of a self-employed person getting a loan are 40 percent lower than employed people. It is interesting because they tend to make around 81 percent more than regular borrowers.
The guide looks at how one can get a loan.
Loan approval decision factors
There are eight factors which determine the eligibility of a loan for self-employed borrowers. The following guidelines will help make your case stronger.
Anything above 740 will get you a great rate. If your score is around 700-740, you will still be eligible but the rates will be higher. Anything belong 700 will exclude you from a lot of options and give you a much higher rate. In case if that happens, try and ask the loan officer if other items in the list below can help make up for the lack of a strong credit score.
Lenders tend to favor owner-occupied properties as the risks are lower and there are good rates. So this means that if you plan on occupying the home yourself, you will have a stronger chance. In the event , that you want to get a second home there may be a slight level of risk. However you will still get the same rate if you are approved. The only risk is if you intend to buy a property just for rental as you will get an extremely high rate.
MA Property Management: Loan product
Lenders like fixing long-term loans as they tend to be less risky. The rates for long term loans are also quite high. So if you want to use a short-term adjustable rate mortgage, you still won’t be able to reduce the level of risk in front of the lender’s eyes. Perhaps it would be wise to stick to a long-term loan if you want to get approved.
Small to medium level lenders sell loans up to $417,000 to big giants such as Fannie Mae and Freddie Mac. They are less likely to take a risk by giving someone a loan higher than that amount as they stay on their balance sheets. In the event something goes wrong, they will be the ones absorbing the loss. They are also unlikely to make exceptions as the loan must fit the parameters of the big lenders.
If you want a loan make sure that you have a handsome amount saved for the down payment. The higher the amount, the lower the ratio will be.
Debt-to-income ratio (DTI)
Your debt to income ratio should not exceed 43 percent. Find a loan officer can help you identify and calculate all acceptable income for you after going through your documents.
Reserves after you close
You need to have around two to six months’ worth of housing cost in your accounts after you have closed a home purchase.
We hope you liked our guide “MA Property Management: Self-Employed Borrowers Guide”.