How to get a South Pasadena mortgage if you’re self-employed, freelancing, or an entrepreneur in is a question our South Pasadena Realtors often get asked from our clients interested in purchasing South Pasadena Real Estate, or other Eastside Los Angeles neighborhoods.
A handful of our clients wanting to purchase South Pasadena Real Estate today have a variety of sources of income, and verification to prove credit worthiness can be a bit more involved than just producing a tax return or a pay stub.
Whether your are a freelancer or the BOSS of your own small business, your income can depend heavily from year to year or even month-to-month.
We’re on the same boat being South Pasadena Real Estate Agents. Our income and earnings structure can make it hard to get approved for a mortgage, but there are a few things we can do to improve our probability, and if you’re smart you’ll chat with a reputable and quality mortgage broker.
Here are three great tips for getting a mortgage if you are self-employed.
Make Sure Your Credit Score Is In Great Shape
While your ability to pay back a South Pasadena, C.A. mortgage is the most critical factor in approval, your credit score is a close second, and that goes for every borrower, not just those who are self-employed.
Additionally, if you have a credit score in which is substantially high — something above 750 or 800 — it will aid in getting approved for a mortgage with low rates.
To help increase your score, our South Pasadena Real Estate Agents suggest that you make sure you:
- Pay all bills on time
- Pay down your debt levels
- Do not make any new large purchases
- Do not apply for new credit during the loan process, or at any time before your loan is closed
Each change to your credit report is like a big red flag to a lender, so just do not do it.
Have A BIG Down Payment
The more money a bank lets you borrow to help you purchase a home, the more risk it is taking that the money won’t be paid back. Not that complex right? Now, if you are self-employed and thinking of taking a higher risk to start with, one way you can reduce some of that risk is to be able to put down a substantial amount of money at front.
Do you have a wealthy oil drilling uncle or maybe a distant cousin that left you a large sum of money? Yeah, I don’t either but it was worth asking.
Putting down 20 percent is traditional for a conventional loan, and you should be willing to grant at least that much if you’re intrigued in the best loan programs and most competitive interest rates. Putting down at least 20 percent down also will save you money in the long run, because you won’t have to pay for mortgage insurance, and you will pay less in finance charges over the span of the loan.
With a good mortgage lender, you can review other programs with 3% down programs, 3.5% FHA programs, 5% down “agency high balance” programs to $625,500 and even 15% down up to a maximum loan amount of $3MM!
While a down payment is essential to the self-employed borrower, there are very feasible low down payment options to discuss with your lender. Our South Pasadena Sellers Agents do suggest you take into consideration that not all lenders offer low down payment options in higher priced areas.
Have Exceptional Assets
An alternative option to put a lender at ease about your ability to pay for a mortgage is to have drastic reserves in the form of assets. If you have BIG amounts of money in routine savings, brokerage, or retirement accounts, it showcases that you have reserves to tap should your income dip.
Additionally, our South Pasadena Sellers Agents say that solid reserves can often times offset the need to have a large down payment or at least allow a lender to think about a smaller down payment if there are reserves held in a 401k, IRA, TSA, or investment accounts.
Whether you’ve a self-employed business owner, an Uber driver, freelancing, working in the entertainment business, have “seasonal or fluctuating” income or you’re an entrepreneur, we hope you’ve discovered these home buying tips on how to get a South Pasadena mortgage if you’re self-employed helpful, and you now are better prepared to work with a lender to get pre-approved to purchase your dream home soon.