If you are self-employed, either as a freelancer or as the owner of your own business, your income can fluctuate greatly from year to year. That can make it difficult to get approved for a mortgage, although there are some things you can do to improve your chances. Here are three tips for securing a mortgage if you are self-employed.

Make Sure Your Credit Score Is In Good Shape

While your ability to pay back a mortgage is the most important factor in approval, your credit score is a close second, and that goes for every borrower, not just those who are self-employed. If you have a credit score in the high range — something above 750 or 760 — it will help you get approved for a mortgage. To boost your score, make sure you pay all bills on time, pay down your debt levels and don’t make any new big purchases or apply for new credit soon before you apply for a mortgage.

Have a Large Down Payment

The more money a bank lends you to buy a house, the more risk it is taking in that the money won’t be paid back. If you are self-employed and considered a higher risk to begin with, one way you can alleviate some of that risk is to be able to put down a large amount of money. Putting down 20 percent is standard for a conventional loan, and you should be willing to contribute at least that much. Putting down at least 20 percent also will save you money in the long run, because you won’t have to pay for mortgage insurance and you will pay less in finance charges over the life of the loan.

Have Significant Assets

One way to put a lender at ease about your ability to pay for a mortgage is to have significant reserves in the form of assets. If you have large amounts of money in regular savings, brokerage and retirement accounts, it offers a reserve for you to tap should your income take a dive. Other forms of property, such as personal and business property that’s paid off and has value, also help.

If you are self-employed and are thinking about buying a home, contact a mortgage professional to discuss your situation and to see if you will be able to qualify for a home loan.

Homeowner’s insurance is an incredibly valuable and beneficial policy for homeowners to have, but it is necessary to understand what traditional policies do and do not cover. Once you familiarize yourself with the intricacies of various plans you will be better educated to make the proper decision when selecting your desired level of coverage.

What’s Covered In Homeowner’s Insurance?

The majority of homeowner’s insurance plans will cover dwelling and other structure protection, personal property protection, natural disaster protection, and bodily injury liability protection. Dwelling and other structure protection plans cover damage to your home and other structures that are directly connected to the home, such as the garage. Personal property protection covers damage or loss of personal property within the dwelling. Natural disaster protection covers your home should a natural disaster cause damage, but note that natural disasters such as flooding and earthquakes typically are not covered. Finally, bodily injury liability protection typically covers injuries to individuals while on your property.

What Is Not Included In Homeowner’s Insurance?

As mentioned above, two of the major natural disasters that are not covered by homeowner’s insurance are flooding and earthquakes. There are specific insurance plans that cover flood damage and earthquake damage, but you’ll find that the vast majority of common homeowner’s insurance plans do not cover these types of disasters.

Homeowner’s insurance does not typically cover home business equipment either. If you are running a business from within your home, small business insurance is required to mitigate your risk.

Personal property over a certain value is also not typically covered unless supplemental coverage is purchased. Items such as expensive musical instruments, artwork, jewelry, and silverware should have their own insurance policy which is dedicated to valuable personal property.

Why You Might Need Homeowner’s Insurance

Homeowner’s insurance is intended to help protect you against the unexpected. You never know when a natural disaster such as a tornado or a lightning strike which causes a fire within your home might occur. Accidents do happen, and a visiting friend or relative can be injured on your property. Homeowner’s insurance is a great protection plan to have to make sure that both you and your property are covered should disaster strike.

When you’re ready to buy your next home, be sure to contact your local real estate agent to leverage their advice and expertise. Your agent will also be able to refer you to the best place to get homeowner’s insurance for your new home.

So – you’ve completed an initial mortgage pre-qualification and now you’re ready to take the next step and meet with your lender or mortgage advisor for the pre-approval interview. Are you ready?

At this stage of the application process your lender will dig into your financial background to ensure that you’re fully capable of making your mortgage payments and that you don’t present too high a risk. Let’s take a quick look at a few questions you should know the answers to before you go in for a mortgage pre-approval.

Do You Have a Specific Home in Mind?

If you’ve already picked out the perfect new home, be sure to bring along some of the details when you meet with your lender. At minimum you’ll want to know the price range that you’re expecting to buy in so that your mortgage advisor can try to find a mortgage that allows you to purchase the home and still meet your other financial goals.

What is Your Current Income from All Sources?

Your income (and that of your spouse, if you have one) will be a major factor in the size of your mortgage, your payment terms and the interest rate that you qualify for. If you have a significant income and it’s clear that you will have little trouble making the mortgage payments you’ll likely qualify for a shortened amortization period that includes a lower interest rate. Conversely, if you can only afford to make a bare minimum monthly payment you’ll be facing a longer mortgage term.

Do You Have Any “Black Marks” on Your Credit?

If you have any negative spots in your credit history you’ll want to ensure that you’re able to answer for them, because your lender will certainly ask about them. Be honest and confident, and remember that the lender wants your business as much as you want to receive a pre-approval for mortgage financing.

What Are Your Plans in the Next Five to Ten Years?

Finally don’t forget that interest rates will continue to fluctuate and that may have an impact on your mortgage in the near future. Be sure to share any major financial plans that you have with your mortgage advisor as they can keep you appraised of any refinancing opportunities that come about.

Buying a home is an exciting time – one that will be far less stressful if you are fully prepared for the many steps along the way. Contact your local mortgage professional today to learn more about how you can get pre-approved for mortgage financing.

If you’re in the market for a new home and you’ve been researching mortgages, you’ve likely come across the terms “pre-qualification” and “pre-approval”. While these terms are self-explanatory in some circumstances, they are quite different in regards to mortgage financing.

In today’s blog post we’ll explain the difference between a mortgage pre-qualification and a pre-approval.

Pre-qualification: an Initial Look at Your Mortgage Options

The first – and easiest – step on the way to receiving mortgage financing to buy a home is known as pre-qualification. During this process you’ll meet with a mortgage advisor or lender who will assess your financial history including your current income and any debts that you might have. Using these numbers they’ll perform a quick calculation that suggests how much mortgage financing you might qualify for when you’re ready to buy a home.

Your mortgage professional will also answer any questions that you might have about the process, including what interest rates you may qualify for, how much you’ll need to invest in your down payment and more.

Pre-approval: A Conditional Mortgage Commitment

After you’ve been pre-qualified for your mortgage and you’re ready to start looking for a new home you’ll go through the pre-approval process. At this time your mortgage advisor or lender will take a much deeper look into your current financial situation, including pulling a credit report to assess how much risk they will have in lending you money. You’ll also complete a full mortgage application as this will allow your lender to get a conditional approval for a certain amount or range. Finally you’ll be informed about the interest rate and the terms of the mortgage once you find your new home and complete the purchase.

The Final Step: Finding the Perfect Home

Now that you’ve been pre-approved and have received a conditional commitment from your lender, you’re ready to find that perfect new home. On top of having a better idea of your price range and what you can afford, you’ll find that sellers are far more receptive to your offers as having a pre-approval signals that you’re a serious buyer who is ready to make your move.

When you’re ready to buy your new house or condo, your local mortgage professional is ready to help. Contact them to learn more about pre-qualification, pre-approval and your financing options. Enjoy your new home!

If you’re thinking about buying a new home and using a mortgage to help cover some of the purchase costs, it’s a good idea to get an initial pre-approval from your lender before putting in an offer.

In today’s blog post we’ll share three quick tips that can help to ensure that your mortgage pre-approval isn’t declined.

Demonstrate Your Income and Good Credit

A mortgage is a major financial transaction and one that carries a certain amount of risk for the lender. It’s your goal to help them see that you have the ability to make your monthly payments and that there is very little risk in approving your mortgage. Be ready to demonstrate all of your sources of income and that your credit rating is clean.

It may be worth paying for your credit report before starting the pre-approval process so you can clean up any black marks or false reports and so that you can see what the lender will see when they check your credit history.

Choose the Right Property at the Right Price

As the home you’re buying will be used as collateral to back the mortgage, the lender will need to see that there is enough value in the home to cover the cost of the mortgage should you fail to pay it back. The “loan to value” or LTV ratio is the amount of your mortgage divided by the value of the home. For example, if you’re borrowing $150,000 to buy a home valued at $200,000, you’ll have a LTV ratio of 75 percent. Keep in mind that each lender will have their own target LTV that they prefer to work with, so you may need to shop around a bit.

Start the Process with Multiple Lenders

Finally, if you feel that your income or credit history isn’t perfect you may want to consider visiting a couple of different mortgage lenders to see what they can offer you. There are dozens of different mortgage products on the market today, and each lender has their own set of qualification criteria that they will use to assess risk and whether they feel that you can afford to pay the mortgage back. Getting a second opinion may help you to discover a more suitable mortgage or one with a better interest rate.

As you can see, there are a number of ways that you can work to ensure that your mortgage pre-approval passes without a hitch. For more information about pre-approvals and to get the process started, contact a local mortgage professional today. After you’re approved it’s only a matter of time before you’ll be moving in to your new home.

Are you about to apply for a mortgage loan in order to buy a home? If so, you may be curious about your credit score and how this might impact your financing.

Let’s take a quick look at how FICO credit scores can affect your mortgage and share a couple of ways that you can boost your score to ensure your application is approved.

What is a FICO Score?

The Fair Isaac Corporation (FICO) is the country’s leading producer of credit scoring information and is the primary source that most lenders will check to assess how much risk you present. FICO combines information from credit bureaus such as TransUnion, Experian and Equifax and produces a score ranging from 300 to 850.

The higher your FICO score is, the better your credit history and the lower the risk you present to lenders. If you have a score above 750 you can expect that most lenders will offer you a mortgage and likely a very good interest rate. If you have a score below 620 or 630 you may find it challenging to get approved and below 500 it will be almost impossible.

How Does a FICO Score Affect My Mortgage?

Your FICO score will affect you in two main ways. First, as mentioned above your FICO score will help to determine whether or not you are approved for a mortgage. Second, you’ll find that the interest rates offered to you by various lenders will change based on your FICO score. An individual with a score of 800 and very clean credit presents much lower risk than someone with a score of 500, and thus a higher score generally means a lower rate.

How Can I Boost My FICO Score?

If you find that your credit score is a bit low and you’re concerned that it will have a negative effect on your mortgage application there are a few steps you can take. First, get a full copy of your FICO score and credit history so you can see who is reporting to the credit bureaus and what information they are providing. You may find that there are mistakes or old items that have not yet been removed which you can then challenge to have taken off of your credit report.

While your FICO score can certainly impact your mortgage and your interest rate you shouldn’t let a low score hold you back from applying. Contact your local mortgage professional today to discuss your options and to determine whether or not your credit will cause you to have any issues in securing a mortgage to pay for your new home.