Securing a Mortgage as a Self-Employed Individual: 5 Vital Tips
Securing a Mortgage as a Self-Employed Individual: 5 Vital Tips
With the right approach and preparation, you can achieve your dream of owning a home, even as a self-employed individual.
As a self-employed individual, securing a mortgage can be a challenging process. Unlike traditional employees, they don't have a steady paycheck, which can make lenders hesitant to approve a mortgage application. However, with the right approach and preparation, they may increase their chances of getting approved along the way.
If you happen to be in the same situation, you're in luck! Below are five vital tips for securing a mortgage as a self-employed individual.
1. Keep Accurate Financial Records
One of the most important things you can do as a self-employed person is to keep accurate financial records. This includes tracking your income, expenses, and taxes. When you apply for a mortgage, lenders will want to see at least two years of your tax returns and other financial documents. By keeping accurate records, you can ensure that you are able to provide all the necessary documentation to the lender. This will also help you understand your financial situation and make informed decisions about your mortgage.
2. Maintain a High Credit Score
This is another important factor that lenders consider when you apply for a mortgage. As a self-employed individual, it's crucial to maintain a high credit score to increase your chances of getting approved for a mortgage. This includes not opening any new lines of credit, paying down existing ones, and making all payments on time. You should also periodically check your credit report to ensure no errors or inaccuracies could negatively impact your credit score.
3. Save for a Down Payment
Saving for a down payment is another important step in securing a mortgage as a self-employed person. Lenders typically require a down payment of at least 20% of the home's purchase price. This can be a significant amount of money, especially for self-employed individuals who may have irregular income. But if you put money aside for a down payment, you may show the lender that you are able to handle a large purchase like a house without going into debt.
4. Work with a Mortgage Broker
Working with a mortgage broker can also be beneficial when you are self-employed. Mortgage brokers have access to a variety of lenders and can help you find a mortgage that fits your unique financial situation. They can also help you navigate the application process and provide advice on how to improve your chances of getting approved for a mortgage. When picking a mortgage broker, be sure to look for someone who has experience working with self-employed individuals and who understands the unique challenges that they face when applying for a mortgage.
5. Be Prepared to Provide Additional Documentation
Finally, when you apply for a mortgage as a self-employed person, you should be prepared to provide additional documentation to the lender. This may include bank statements, business financial statements, and other financial documents. You should also be prepared to explain any fluctuations in your income or expenses and provide evidence of the stability of your business. By being prepared with all the necessary documentation, you can help streamline the application process and increase your chances of getting approved for a mortgage.
THE BOTTOM LINE
Securing a mortgage as a self-employed person can be challenging, but it is not impossible. By keeping accurate financial records, maintaining a high credit score, saving for a down payment, working with a mortgage broker, and being prepared to provide additional documentation, you can increase your chances of getting approved for a mortgage. With the right approach and preparation, you can achieve your dream of owning a home, even as a self-employed individual.
If you are looking for reliable mortgage brokers in Canada, look no further than our experts here at Level Up Mortgages. We are a mortgage broker team focused on helping the self employed, new immigrants, non-residents, and investors, access best rate and alternative lending in Canada. We have been nominated for best up and coming broker in Canada in 2021 and have been on CTV News and various publications because of our education-first approach to helping you always stay a step ahead of the process. Reach out to us for access to our first-time buyer course or a mortgage strategy session.
See What You Qualify For Or Contact Paul To Get Your Pre-Approval.
Paul Davidescu (www.levelupmortgages.com)
Level Up Mortgages
604-809-3188
paul(at)levelupmortgages.com
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