Even before the pandemic hit, many people in California were already self-employed, but this number increased even more once COVID-19 was in full swing.
If you are self-employed and considering obtaining a mortgage, you may be concerned about how your financial position may impact your ability to qualify for a mortgage. After all, regardless of how successful your company is, you are unlikely to have a fixed salary that you can use to demonstrate your income.
Remember that a successful self-employed person has just as much opportunity to get a loan as anybody who has a traditional job. Let’s go through a few important reminders you should consider when applying for a self-employed mortgage in California.
Providing Your Financial Information
Your financial information will be requested in the same manner as your personal and business tax information will be requested. The lender must, after all, be aware of your financial performance over the last several years.
To be evaluated for a loan, you will need to provide financial documents for any business accounts or credit cards that are connected to your company, as well as personal financial information.
A self-employed mortgage in California requires a detailed financial examination of all assets. In addition to your tax returns, you may be asked to submit other documentation to support your application.
Presenting Your Tax Returns
A lender would demand proof of your ability to repay a loan. It is common practice to provide a prospective lender with a copy of your tax returns.
You will need to present them with tax information about the business and your personal returns. At a bare minimum, you must submit a prospective lender with at least two years worth of tax records, including both personal and company taxes.
Again, keep in mind that you will very certainly be required to submit further paperwork, which we can assist you with.
Showing Financial Stability Through Your Business Income
The same reason a person with regular employment must disclose their income and assets to a prospective lender is the same reason you must submit so much financial documentation: to show financial stability. Your company must be lucrative and stable to show stability.
For mortgage lenders, it is all about investing in individuals who are likely to pay off their house loans in full and on time, as well as ensuring that you are financially able. For the most part, the amount of money you make through self-employment must be stable or show growth over at least a few years.
Minor changes and fluctuations in your financial situation will not always exclude you from getting a loan. As long as you haven’t seen any significant decreases in income in the recent past, you should be fine.
Choosing the Right Lender
When you’re self-employed, not every lender will be simple to deal with. In certain instances, larger banks are less willing to provide loans to individuals who are seen to be at risk, such as those who do not have paid jobs. However, at Hawkins Home Loans, we can offer you greater options.
Even if you cannot get a self-employed mortgage through your bank, we can provide the most appropriate loan arrangements for you. In addition, we can assist you in translating your financial position into the language and documentation needed to get a house loan for you.
Understandably, the uncertainty will make it more difficult for self-employed individuals to get credit until the economy is stable, but there will always be lenders that understand your position and are ready to offer you a house loan.
Lastly, don’t get too bogged down by the additional bits of paperwork and other fine details you’ll need to provide as a self-employed individual. There are many mortgage broker alternatives available to assist you in purchasing your dream house.
We’re here to make your home loan experience as efficient and straightforward as possible. Whether you’re buying a home, refinancing, needing cash from your home equity, Hawkins Home Loans is your online resource for a stress-free process, incredibly low rates, and fantastic service. Reach out today!