August 25, 2019

Self-Employed Experiencing Hard Times Obtaining Mortgages

Self-Employed Experiencing Hard Times Obtaining Mortgages

While the housing market is past the housing bust which had struck the U.S. economy after recession in 2008, it is still not easy to get a home loan. As compared to the period before recession, when getting a loan was not too difficult once you just filled the applications, people now have to file a lot of paperwork for getting one.

Self employed people go through an even harder time in the same category since the housing market went bust, as the program of self-certification for borrowers has been scrapped since then. Before the credit crunch these self-certifications were submitted by the self-employed borrowers in return to verify their incomes to the lender. They were increasingly popular between the period of 2005 and 2007.

These loans, now known as “liar loans”, have been scrapped since February 2010. Now self-employed people, have to produce more detailed financial records to prove their sustainable economic background. This involves an increasing paperwork and other formalities to ensure the lender of their capability to pay the loan back.

Self-employed borrowers are now asked to give in complete records of two to three years of their earnings statements. They are required to submit two years of tax returns which would be signed and verified by the IRS and reviewed again by the lender to check falsified documents. A history of two years in self employment becomes essential in qualifying for a mortgage.

Lenders could also ask for cash reserves for a certain period of time which would be settled as liquid assets of complete mortgage payments. The period of payment can vary from six months to a full year, dependant on the amount of loan.

The self-employed borrowers can also show their taxable income under the home loan category to meet the qualifications for the lender. This will mean that the minimum number of tax deductions would increase the chances of getting a home loan, as the taxable income would be higher and more reliable for the lenders.

Other ways in which self-employed borrowers increase their chances of obtaining a home mortgage is by maintaining a high credit score. One of the ways for maintaining a good credit is to timely pay off the debts of credit cards. Good and stable records are now thus increasingly important for self-employed people to get the house of their dreams

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