Self-employed borrowers face uphill battle
Posted on Thursday, December 4, 2014 at 8:54:00 AM
Tight lending standards have characterized the housing market over the past several years, but well-qualified borrowers still have a strong chance of securing residential financing.
However, that becomes a more difficult challenge for the self-employed. According to an analysis by Zillow, self-employed borrowers get 40 percent fewer purchase loan quotes than those with traditional employment. This is even as many of this segment have higher incomes and are in the market for more pricey properties.
"Self-employed borrowers will no doubt face headwinds when trying to get a loan," said Zillow vice president of mortgages Erin Lantz. "Low credit scores, coupled with a mountain of paperwork lenders must complete specifically for self-employed borrowers, make them unattractive. So, despite self-employed borrowers with high incomes appearing on paper to be better situated to repay their loan, they're often overlooked by lenders."
This isn't always the case, though. Self-employed borrowers can position themselves to be just as attractive as their counterparts to lenders. If you are in the market for residential financing, make sure you have the best possible credit score. It is also beneficial to offer a large down payment. Most importantly, provide documents that show your business exists and has a steady stream of revenue. This will help you secure your next loan.