Mortgages for Self-Employed Manteca Borrowers
Mortgages can be difficult to obtain, especially in the market today. Many self-employed Manteca borrowers have an even harder time getting a mortgage from a lender, not because of their income but because of their credit scores. Many self-employed Manteca borrowers have a credit score that is under 700 even though they typically make more than others in the workforce.
Even though this can be discouraging, it is not impossible to get a mortgage as self-employed Manteca borrowers. There are multiple factors that a lender will take into consideration when evaluating someone for a loan. Credit scores are a large factor but they can be overlooked if there are other factors that outshine a lower score.
Credit Score
This can be a most difficult obstacle to overcome. Most lenders want to see great credit scores coming in so they are taking less of a risk in lending money. The better the credit score the better the rate on the loan will be. Many banks will take any score that is above 700. Anything lower than this will bring a borrower a higher rate and a bit more trouble when trying to find a lender that will work with them.
Debt to Income Ratio
Debt to income ratio is a large factor in determining if a borrower can truly afford a mortgage. This will include any housing costs and all debts in a percentage of income. Lenders look for ratios that are less than forty-three percent. After the debt is higher than this percentage it could be too big of a risk to lend to the borrower.
Be sure to go to a lender that is well versed in self-employed income. This is going to greatly help the accuracy of this ratio. There are some lenders that do not accept self-employed or contracted work as an income. Check before going through with the application for the mortgage.
Loan to Value Ratio
Another important ratio is the amount of loan needed to help pay for the value of the Manteca home. This translates simply into what the down payment will be on the house. The larger the down payment the less money needs to be borrowed to pay for the remainder of the Manteca house’s value. A smaller ratio is the best.
Loan Values
Any loans that are under $417k are likely to be sold to Fannie Mae and Freddie Mac. These types of loans will not make as many exceptions so they are able to be negotiated on these terms. If the loans are higher than this value, they are kept by the lender. Meaning there are more exceptions allowed.
Loan Product
The longer a fixed loan is the higher the rates will be. A 30-year fixed loan with have higher rates but are a lot safer than other loan options. It can be beneficial to go this route if the market is likely to take a turn for the worse. An adjustable rate mortgage can reduce a rate but does not mean the lender finds the borrower less of a risk.
Occupants
When looking to buy a Manteca house lenders want to give those that are purchasing for their family. They give those that are buying properties for their primary home the lower rates compared to someone who is purchasing a rental property. Rental properties pose much more risk than an owner-occupied home for a lender.
Types of Property
Similar to owner-occupied homes, single family Manteca homes have the lowest risk for a lender. Any homes that have multiple housing situations like a condo are much riskier. The more properties being purchased or financed the higher the risk. It is always better for an owner to live in one of the multiple properties to help bring this risk down slightly.
Cash Reserves
Lenders want to know that a borrower will be able to pay back their loan. The reserves after the mortgage have gone through are taken into consideration. Some lenders prefer to have reserves like retirement accounts with their financial institution for the length of the mortgage.
Being self-employed does not mean that a person cannot obtain a mortgage. It can be much more work to find the right lender, but it is possible. With a little research into finances and financial institutions, self-employed Manteca borrowers can find a situation that fits their needs.