The ‘self-employed’ status should not create an obstacle before your lifelong dream of owning a house. After spending years in lofts or confined apartments, you require a real house. Of course, conventional loans are hard to acquire when you are a freelancer or seasonal worker. Without compensating your career or job status, you can gather knowledge of bank statement mortgages. This alternative widely focuses on the bank statements whereas the conventional or non-conventional loans ask for W-2s or pay stubs. Understanding how hard it gets to prove salary, such loans save every self-employed person’s life.
So, how do the bank statement home loans in Houston work? The mortgage is primarily used by the employees who thrive on self-employment. Looking at the recent statistics, more than 25 million US citizens are interested in gigs than regular 9-5 jobs. Due to the rise of applicants, the bank statement mortgages have become so popular. So, you need to submit 24 or 12 months of personal bank statements to get hold of a decent credit score, minimum two years of self-employment proof, business license, adequate liquid reserves, and a letter from a tax accountant. Of course, the requirements vary but the basic scenario is the same everywhere. Once you are eligible for the home loan, you can expect high loan limits and use it for investment purchases. Nevertheless, you should steer clear of a few common mistakes at any cost.
So, let’s have a look at the common mistakes made by other freelancers for bank statement home loans.
High but Unstable Income
The local lenders always check whether your income is high enough so that you can pay down the mortgage in a hassle-free way. Now, the freelancers should maintain a steady income without sudden fluctuations which might hamper their capacity to pay off. For proving stability, you must have at least two years of tax returns. In case you are new to this field, the lender can consider one-year self-employment tax returns. If you are running a business, you should submit a profit and loss statement.
Gather Necessary Paperwork
A lender will check your financial assets, savings, and debt obligations for confirming whether you have what is needed to take a home loan easily. Start finding a quarterly statement including stocks, IRAs, and bonds. If you have any real estate holding, you should submit its proof. Don’t forget to prove that you have enough funds for a down payment. Along with it, you need to find a residential history. It is vital to remember that your landlord’s contact information is necessary to get through the process. We understand how difficult it gets to gather updated records of your business but many borrowers miss this important point. Also, freelancers overlook getting help from the lenders who can help them to identify financial inaccuracies. So, do not make the mistake of not collecting essential paperwork.
First-time buyers are bound to make mistakes and the lenders save their dreams by helping them in every step. Don’t forget to find a professional lender!
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.