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Oct. 4 - Self-Employed are Victims of Tougher Mortgage Market
Information for Buyers
WASHINGTON – Oct. 4, 2007 – It is growing increasingly difficult for the self-employed to get a mortgage.
Some lenders that specialized in home loans to self-employed workers and small-business owners have gone out of business. And many lenders that still offer such loans have tightened their standards, making it harder for self-employed borrowers to qualify.
Here’s what self-employed borrowers need to qualify for a mortgage in this new environment, according to Marc Savitt, president of the National Association of Mortgage Brokers.
More documentation. Along with two years of tax returns, self-employed borrowers might be asked to provide a profit-and-loss statement, bank statements and proof that they’ve been in business for at least two years. A letter from their accountant probably won’t be good enough.
Fewer tax deductions. Savitt says self-employed workers who plan to buy a home in the next year or two might want to forgo some deductions. “Make sure you can show as much income as possible,” he says.
Larger downpayments. An old-fashioned 20 percent down is very persuasive.
Excellent credit. A credit score of 720 or higher will give a self-employed borrower some choices.
Patience. Even for well-off business owners, qualifying for a mortgage is “not that smooth, easy no-brainer like it used to be. If you want it to be quick, you’re paying a higher price,” Savitt says.
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