How to overcome home buying challenges if you are self-employed
It is great to be your own boss. You can chase your dreams, decide your work hours or go on a vacation whenever you want. While self-employment offers a lot of advantages, it usually becomes a hurdle when you want to fulfil your homeownership dream, particularly if you are planning to buy a home with a conventional mortgage.
Self-employed professionals don’t make a fixed amount of money every month. This makes it difficult for them to get a mortgage from a conventional lender.
Before we discuss how self-employed professionals can realize their homeownership dream, let’s find out why it is difficult for them to get a mortgage:
Lack of fixed and verifiable income
Banks usually prefer to approve a mortgage application when the applicant is making a fixed income. That’s why it is easier for salaried people to get a home loan. Banks follow various underwriting norms such as loan-to-income and value-to-income ratio when scrutinizing a loan application. If an applicant is not making a fixed income, they’ll consider him or her a risk.
Credit score issues
When you apply for a mortgage, your credit score will be one of the most important factors that the lenders will take into consideration. It is anyway difficult to get a mortgage with a low credit score, but if you are self-employed it is going to be almost impossible. Lenders offer the best mortgage deal only when you have a great credit score.
So if you are self-employed, should you give up your homeownership dream?
Well it may be difficult for you to take out a conventional mortgage, but you can consider other financing options such as owner financing.
To know more about how you can buy a home with owner financing, click here.
In an owner financing arrangement, the seller extends financing to the buyer. Unlike a conventional lender, the seller doesn’t necessarily have to take into consideration your credit score and income. So you can buy a home with owner financing with no credit check or income verification.
Another advantage of owner financing is that you can customize the purchase agreement in any way you want (of course with the seller’s consent). So if you don’t want to make a balloon payment, you can specify this in the purchase contract.
The bottom line is that owner/seller financing is a viable financing option if you find it difficult to get a mortgage from a bank.
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