There has been lots of misconception regarding the self-employed people and mortgages. A lot of people believe that if you are self –employed then you are automatically disqualified for an FHA loan because of your employment status.
On the contrary, this is not the case. In as much as small businesses face major challenges when they are in their early stages, being self-employed does not disqualify you from getting an FHA loan. Nevertheless, business owners may find the process of acquiring the loan quite rigorous because the lending standards are tougher on their side. One of the reasons is because several business owners do not keep business records. Being successful whilst running your business is amazing, but if you can’t show the documents to prove this, then the lender can find it hard to give you a loan.
Not having your taxes professionally prepared or your profit-loss statement updated could halt your FHA loan faster than you can imagine. Planning ahead is vital when preparing to buy a home. In this case, you may be required to deal with any issues regarding your credit reports. A good recording keeping, paying attention to taxes and finding steady work will put you in a better place to get approved for the FHA loan. So what are tips to getting your FHA loan approved? The tips include:
-Apply for the loan with an approved FHA lender
This is the first step when it comes to loan applications. Online databases contain names of renowned lenders who are certified to give out loans.
-Provide the necessary documents
The other important aspect for getting your loan approved is to provide your lender with specific documents for verification purposes and income calculation. These documents include 2 years dated and signed tax returns and an up to date profit and loss statement and a subsequent balance sheet. Corporations are also required to submit a business credit report.
These documents will ascertain if an individual meets the set guidelines. Additionally, they will also clarify and determine the amount you qualify for. One important thing to note is that if your tax returns are much smaller compared to the income you are making, this could significantly reduce the loan amount that you qualify for.
In some cases, the borrower could receive a rejection from the lender. That is why it is vital to ensure that your tax returns match your income if you want to qualify for an FHA loan. Choosing your years carefully will also give the lender a reason to approve your loan. This is because some businesses incur a decline in income from one year to another. Showcasing this trend may lead to rejection as the lender doesn’t term you as good risk due to the unstable income. Showing increase from one year to the other assures the lender that your business is doing well and has the right footing.
Any self-employed person can be approved for an FHA loan if he/she follows the tips listed above. Proper documentation and supporting evidence are tools that guarantee your loan approval.
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