Monday, August 31, 2009

If you're self-employed you can still get a great mortgage.

A mortgage has the most direct impact on your lifestyle and allowing yourself enough time to talk about mortgages with the right mortgage professional sets you up for financial success.

There’s a lot to know when you’re arranging a mortgage. Understanding how the five C’s of credit impact your ability to obtain a mortgage will help you get a better mortgage in the end. Ensure that your mortgage professional spends time talking about the five C’s of credit and offers you advice, rather than only quoting interest rates. Allow yourself enough time to get your financing in order before you purchase the home of your dreams. Explore all the mortgage options available to you and pick the product that best suits your needs.


The five C’s

Knowing how mortgages are evaluated can help you—especially if you are self-employed—get the best combination of features and rates.

Captial: The down payment

In all mortgages the more money put down, the better. For individuals who can’t confirm their income but have stellar credit will need a minimum down payment of 10 per cent to get the best mortgage rates.

Credit: Your track record

To maintain a good credit score it’s best to pay bills on time, even if you’re making only the minimum payment. For self-employed people, a higher credit score means less weight is placed on income verification.

Collateral: The state of property

A good location and a solid property are key features mortgage lenders look for. In a self-employed situation where income can’t always be confirmed, the property should be highly marketable.

Capacity: Your ability to pay

Capacity is often difficult to prove in self-employed people and refers to the client’s ability to pay, which is often proven by T4’s, NOA’s, and a job letter. No more than one-third of the family income should be allocated to the mortgage, heat, and property taxes.

Character: Stability is king

Mortgage lenders like to see trends in a person’s job stability and job stability within a specific sector is often more important than staying at the same company for any period of time