Wednesday, March 21, 2007

Home Mortgage Loans for People That Are Self-Employed

For self-employed borrowers getting a mortgage can be challenging. Although it is generally harder to prove your income, it does not have to be a nightmare. There are, in fact, several ways for you to qualify for a mortgage. Below are the three most common ones:

1. Two Years Tax Returns

First, a lender will look at your average income based on two years tax returns and a year-to-date profit and loss statement. This option is step one, but more than likely, your accountant helps you write off enough deductions to show very little income. This is great for taxes, but it makes it difficult to prove you can support the loan you are applying for.

2. Stated Income and No Income Verification Loans

These loans do not require you to document your income at all. Stated loans basically give you the right to "state" a reasonable income on your application that will not be verified, while no-documentation loans are based on your credit history alone. Since lenders take a risk when they do not confirm your income, you will be penalized with a higher interest rate to compensate for that threat.

3. Bank Deposit Income

Another way that lenders are now using to qualify self-employed borrowers is to consider your bank deposits. If you are depositing your earnings into the bank, lenders can come up with a twelve month deposit average and use that as qualifying income. As a rule, these loans have lower rates than the types of loans where you verify no income at all, and in some instances you will get a rate closer to conventional fixed rates.

Knowledge of these various options should ease your mind, and ensure you that there will be a way for you secure your needed mortgage loan.

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