Getting a mortgage can be a real headache. And if youre self-employed the process can require truly Herculean measures. But dont panic. There are lenders out there willing to work with you, according to Darlene Lee, a vice president at The Bank of New Canaan.
Realize and accept that the playing field has changed, says Darlene. There are fewer lenders. Government agencies have changed underwriting guidelines and credit scoring and home valuations are more important than in the past. Obtaining a mortgage as a self-employed borrower has always been a challenge due to the unpredictability of profits and cash flow, so a working relationship with a local bank can be a boon if you need any sort of loan.
Our mortgage loan originators provide guidance to each mortgage applicant, says Darlene. They take the time to discuss options and explain how the loan will be viewed and underwritten. In some cases, the bank will even underwrite a mortgage loan internally to its own portfolio. And this is good news for the small business owner.
If youre self-employed, the burden of proof is on you. Youve got to be organized. Gather all your personal and business financial materials from the last two years. Include all the pages and schedules from your tax returns. Have an up-to-date profit and loss statement and balance sheet prepared, and make sure you include every page of any bank or investment statement, including the ones that say left intentionally blank.
As a general rule, a self-employed borrower must have been in business for at least two years before a lender will consider providing a loan. Theres a very limited number of lenders who will offer a loan on stated income documentation, Darlene says. And youll need impeccable credit as well as a significant amount of equity in your home.
Darlene is about as local a banker as youll find. She grew up in Greenwich and now lives in New Canaan with her husband Tom and their three kids. Ive been in banking for 25 years, she says. Gosh, thats a long time!
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