How Can You Get Past Contractor Mortgage Issues? – Guest Post
Contractors can face a unique obstacle when it comes to obtaining a mortgage. This problem may be initially ignored by contractors in cases where they feel that their income should be good enough on its own. However, there are other considerations. Take for example a person who has worked for a number of years at the same company and has had a documented steady income as a permanent employee. If that individual’s credit rating is satisfactory, they could easily compare home loans with any bank and choose the best rate. This may not always be the case when it comes to someone who may have the exact same income, but has been working as a contractor for various companies.
As a contractor, you may discover that the bank has a policy of refusing to lend to contractors – period. If you do locate a bank that is willing to lend, you could be offered a rate that is much higher than average. Most of this revolves around the fact that lending institutions are generally set up to assist those who are permanently employed and are receiving a regular salary. In addition, the staff members of these institutions are trained to deal with a permanent employee lending scenario as well so anything else tends to make them a bit nervous. So, in order to secure a reasonable rate for a mortgage, contractual employees will look for a contractor mortgage broker for assistance.
Be prepared with your finance information
Prior to searching for the best deal, contractors need to understand that certain information will have to be compiled before proceeding. This is similar for permanently employed individuals but with a few added items. As the bank uses a lending calculation based on percentage multiplied by the salary plus a dividend those two figures will work against the self-employed mortgage seeker. This can be overcome by calculating a mortgage based on gross revenue or daily rates instead.
Of course, the contractor will need to provide hard income evidence, just as anyone else who is applying for a loan. The one thing to take note of is that you will have to be employed as a contractor for a period of least a year. To give an accurate assessment as to what you’re capable of earning is to show the most lucrative contracts that you possess. You also need to provide proof that you will be able to secure future contracts and of course a good credit score.
Choose a broker
If you’re asking yourself, “How much can I borrow?” and at what rate, then it’s advised that you seek out a broker in order to have them work with the various banks and lenders and secure a good deal. One of the primary considerations will be determining that the broker isn’t working for the lender that you’re negotiating with. This means that it would be within the interest of the broker to lean towards the lender when it comes to securing your interest rate.
A broker will be interested in finding out if you have a partner who is permanently employed. If that person’s income is sufficient enough it may be advantageous for them to secure the mortgage on their own, rather than enter into a joint mortgage. That’s because, as mentioned earlier, banks are nervous when it comes to lending to contractors.
In conclusion, if you’re a contractor who can demonstrate that you’ve been on a good contract for over a year and have good credit, you can still get a good deal on a mortgage. It just takes a bit more preparation and an expert broker.
Paul Ramos is a freelance writer, editor, and researcher who spends time writing and researching on a variety of financial and real estate topics. As an experienced financial writer, he is interested in helping readers to have a better understanding of issues relating to daily finance, researching home mortgage loans and mortgage broker options for home and business buyers and investors.