Information that you’ll need to be approved for a mortgage includes, but not limited to:

While this may suffice for anyone with a normal job or proof of employment. An entrepreneur is unfortunately stuck in the position where their “self-employment” is considered “unemployed.” Standard loan applications are heavily favored towards individuals with steady employment.

Entrepreneurs have a hard enough time renting an apartment without a “letter from a Certified Public Accountant”stating their reported income is “legitimate.” If renting is this difficult, you can imagine the hurdles you’ll need to run through buying your home.

Typically, an entrepreneur will need to provide monthly bank statements for a minimum of a year and a letter from a CPA stating their tax returns accurately reflect their income. If an entrepreneur has a “paper loss” or negative earned income due to depreciation and other non-cash deductions, then they must be explicitly explained to demonstrate their true earnings. Thus, an entrepreneur is in the unenviable position of trying to report more income to substantiate a loan, while minimizing their tax liabilities. Entrepreneurs will need to brace themselves for these questions that will assuredly come from a lender.

Assuming, you’ve providing everything above it’s possible that a bank or mortgage broker may request additional information to obtain an appropriate mortgage.

Is it better to use a bank or a mortgage broker? A bank is an individual institution that you’re applying with in order to obtain a mortgage. A mortgage broker allows you to apply to multiple lenders simultaneously. But, the information you’ll use for the application is going to be the same for either a bank or a mortgage broker. Effectively, a mortgage broker is able to do more of the legwork instead of you having to apply to each lender individually.

Typically, you’ll find that an effective mortgage broker will respond and turn around your application significantly faster, than a bank due to their large infrastructure. A Senior Executive at Heritage Mortgage Banking Corp. explains that “banks have moved towards focusing their efforts to target high net worth individuals or jumbo loans.” They’re using their lending practices to convince wealthy individuals to switch their banking institutions. Thus, their lending is being used as a conduit for them to increase their retail bank market penetration.

The increasing mortgage interest rate means that large banks are going to provide incentives to affluent home-buyers. But, middle-class home-buyers may be better off looking elsewhere for the most favorable deal. It’s important to spend the time and effort to obtain the most favorable rate possible at the time of your purchase. Refinancing is an option, but it may be a trap that’s giving you a false sense of confidence that you’ll be able to get a better rate any time after you buy your home. Refinancing is often expensive and cost-prohibitive unless you’re able to arbitrate a significant reduction in your interest rate. Do your homework and be a smart homeowner. The last thing anyone wants to be is underwater on your first home purchase.

*The views, articles, postings, and information listed at this website are personal and do not necessarily represent the opinion or the position of Big Valley Mortgage.*