Mortgage applications can take time to complete, especially for self-employed people. Self-employment might offer freedom and independence, but it also presents more difficulties when applying for a mortgage. Avoiding common errors that self-employed people frequently make is crucial to improve your chances of success and finding the best mortgage for your needs. The top errors to avoid while submitting a self-employment mortgage application are listed below:
Failure to Maintain Accurate Financial Records
Establishing income stability and financial sustainability is one of the most important requirements for obtaining a self-employment mortgage. Many self-employed people need help to keep precise financial records.
Lenders often want complete and orderly financial statements going back at least two years, including bank statements, profit and loss statements, and income tax returns. A mortgage application may be delayed or even rejected if adequate records are not kept.
Mixing Personal & Business Finances
Maintaining a clear separation between your personal and corporate finances is crucial. Combining these finances might need to be clarified, making it difficult to estimate your income and expenses precisely.
When determining whether or not you qualify for a mortgage, lenders prefer to see a distinct separation between your personal and corporate accounts. Clarity will be improved, and the mortgage application process will go more smoothly if personal and business use of credit cards and bank accounts are kept separate.
Not Planning Ahead
Planning and leaving enough time to acquire the required paperwork and financial records is important when self-employed people decide to apply for a mortgage. To ensure everything is in order, gather your documents well before applying for a mortgage.
By doing this, you can avoid delays and give yourself time to address any problems or inconsistencies that may come up while submitting your application.
Underestimating Income or Overstating Deductions
It’s important to be truthful and reasonable when determining your income for mortgage qualification purposes. Some self-employed people overestimate their deductions or understate their income to lower their tax obligation. While this might be advantageous for tax purposes, it could be detrimental if you want to get a mortgage.
Lenders will determine your income based on your financial statements and tax filings. To increase your chances of getting a mortgage, balancing taking full advantage of tax benefits and truthfully reporting your income is essential.
Applying for Credit & Making Large Purchases
Avoid Making Significant Changes to Your Credit Profile During the Mortgage Application Process. Applying for Credit or Making Big Purchases. Your credit score and debt-to-income ratio, important criteria for mortgage approval, might be severely impacted by applying for new credit, taking on more debt, or making significant purchases. Wait until your mortgage is authorized and closed before applying for new credit cards, financing a new vehicle, or making big purchases.
In summary, applying for a self-employment mortgage necessitates thorough preparation and attention to detail. Contact Dominion Lending (Charlene Elliott) if you need support or guidance with your application for a self-employment mortgage in Fort Mcmurray. Our knowledgeable staff specializes in guiding independent contractors through the mortgage application process and identifying suitable financing solutions. Avoid these typical errors by contacting us immediately to ensure a successful and efficient application process.