Posts Tagged getting a mortgage
How to get a Mortgage if you are Self-Employed
Posted by Top Home Loans in Credit Information, Mortgage Advice, Mortgage News on April 20th, 2009
For full-time employed people, it is easy to verify that you have the income available to make your regular mortgage payments. All you need to do is get your most recent pay stub and your most recent T4 and that is usually all you need; however, if you are a self-employed individual or a contractor, then proving your income could be a lot more difficult then you would think.
What Documents you Need if you are Self-Employed
When you are planning to apply for a mortgage and you are self-employed, then it is best to make sure that you have collected all the required documents before looking for a property to buy. The first thing that you need to know is that most lenders will average your last three years income. If you work for yourself, then you will need your last three years Notice of Assessments. The underwriter reviewing your income will average your previous three years income to determine your current income.
If you own and operate your own business, then you will need all your accounting documents, your T1 Generals, and your Notice of Assessments for the past three years to qualify for your mortgage. You will also need to provide statements of business activities. If you have the documentation showing the registration of the business, then you will have to provide this as well.
Once you have collected this documentation, the first thing you should confirm is that you have no outstanding taxes. If you have outstanding taxes, then the bank will consider this as a form of collections, and they will not be able to fund your mortgage until after you have paid off your outstanding taxes.
Most self-employed, contractors, and business owners gross down there income as much as possible in order to reduce there tax brackets. This could have a negative impact when trying to apply for a mortgage, and you may be unable to qualify for a mortgage.
What to do if you do not have Proof of Income?
If you do not have sufficient proof of your income or you have not been self-employed for long enough, then you may not have enough income in order to qualify for the mortgage. You may not have any income at all available to apply for the mortgage. Most mortgage insurance companies understand this, and they have developed insurance programs to suit these self-employed individuals.
For example, you have been self-employed for one year, and you have only been making 6 figures for one year. Before that you were barely making $30,000. The income that you have available is not enough to qualify for a mortgage, so you can use this program to qualify.
Also, if you are running a business, but you have not filled your taxes yet, then you may be eligible to apply for one of these programs. Another example is if you had grossed down your income way too much, and you are now unable to proceed with a mortgage.
What is the Premium of this Mortgage Insurance?
When you have no other choice, you may have to take this more expensive form of insurance. This insurance will run you a large premium over normal insurance, and could be more than double what the average mortgage insurance premium costs. Be prepared to hear a large number when you ask what the insurance premium is when you are using one of these programs.
If possible, then it is best to wait until you have sufficient income and sufficient proof of income in order to make the purchase because you may pay not only thousands, but tens of thousands of dollars in order to be able to purchase the home that you had be searching for.
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The Importance of the Mortgage Pre-Approval
Posted by Top Home Loans in Mortgage Advice, Mortgage News, Real Estate on January 10th, 2009
Whether you are a first time home buyer or a seasoned real estate investor, it is extremely important to have a valid pre-approval at all times. A lot of house shoppers decide that they will ’shop the market’ only after they have placed an offer in on a piece of real estate; however, this is not the best way to ensure you get the lowest rate or the best type of mortgage. With the volatility in mortgage rates, a rate that you see today may not be as good as the rates were a few months ago. In order to optimize your mortgage, you have to do a bit of work as well.
The Pre-Approval Process
When you first decide that you are going to go into the market to buy a new house, before ever going out of your house to look at properties, you should contact a lender or a mortgage broker. They will give you critical advice on the mortgage market, the real estate market, and all the details to assist you in your house shopping process. You will also be able to call on your mortgage specialist at any time if you have any questions or concerns. With the pre-approval, they will assign you the best rate, as well they will tell you what the maximum mortgage that they may be able to get approved for you.
Pre-approvals are usually good for anywhere from 60 to 120 days. With pre-approvals, the longer the pre-approval that you have, the better. This will insure that you know what your payments and interest rate is, even if the market fluctuates wildly. The pre-approval only takes a few days to have done by your mortgage broker, and it may be beneficial for you to get multiple pre-approvals for different types of products. Once you have received the pre-approval, then it is time to shop to find a house; however, this is not the end of the pre-approval process.
What to do Once you have Received the Pre-Approval.
Many people figure that once they have received a pre-approval, then that is the end of the process; however, that is only the beginning. Even though you have a guaranteed interest rate, you should still be watching the interest rates. If the interest rates go lower than the pre-approval that you have, then you should contact your lender or mortgage broker to have a new pre-approval created. This will allow you to always have the lowest pre-approval possible. Many mortgage brokers and mortgage professionals have a lot of clients; unfortunately, this means that they will not have the time to adjust your pre-approval on there own, and they will need a follow-up from you if you want an updated pre-approval. It is not very hard to check interest rates because almost every company has a website that you can visit at your own convenience to look at the interest rates. If you are able to check the interest rates once every few days, then you should be able to determine when you should get an updated pre-approval. When you do update your pre-approval as well, then this will allow you to extend the duration of the pre-approval as well.
Pre-approvals, not just for your First Purchase
Many home buyers assume that a pre-approval is only useful when making a purchase on your first house. It is also a myth that a pre-approval is for uneducated people looking to buy a home; however, this is not the case. If you are planning on buying a home, selling and purchasing a new home, or buying another property, then you should definitely get a pre-approval. The major benefits of the pre-approval is that a trained professional will look over all your details, provide you with expert advice, and protect your interest rate for a certain duration of time. If you are considering doing anything with real estate, then it is important to contact a mortgage professional.
A mortgage pre-approval is a crucial step in the mortgage process, and if you manage your pre-approval successfully, then it could be the difference in tens of thousands of dollars based on the final interest rate that you are able to obtain. Make sure that you discuss your options with your mortgage broker or lender to make sure that you work with them to try and get the best deal possible. It may seem like a bit of a hassle; however, in the long run, it will be very beneficial to manage your pre-approval.