Those of you who are self-employed may already know that it is harder to get a loan, let alone a loan against your home equity. The good news is that it can be done. Here is some information and advice about how a self-employed person can get a home equity loan.
First, the truth is that being self-employed will make it harder for you to get a loan. The most important thing for the lender to see is proof of a good income. When you try to prove it, some lenders will make it harder than others. One lender may ask you to show proof for the past two years, while another may want proof for the past three years. This means that a no-document loan is probably also out of the question.
In terms of your own finances, you will also need to keep an eye on how much debt you already have. When deciding whether to give a home equity loan, all lenders look at the borrower's debt-to-income ratio. Most lenders want the ratio to be no more than 36 percent, which includes all mortgages and loans. But if you are self-employed, it might be best to stay as far away from this number as possible.
Before you apply, you should also look over your credit report to make sure it doesn't have any false information. Once the problem has been fixed, it's not too hard to fix these things, but it will take about two months for the changes to show up on your credit score. If you haven't had a steady income for more than two years, you will probably have to pay a higher interest rate. But if you have a good credit score, this won't be too bad.
Right now, more and more people are doing their own jobs. Many lenders still don't have ways to meet your needs if you fall into this group. But new products are being made to meet the needs of the growing number of people who quit their jobs in the commercial sector. But it might take a while before there is real competition and the stricter requirements are eased.
You can get a home equity loan as either a mortgage with an adjustable rate or a mortgage with a fixed rate. You will have to figure out which one is best for you and think about the possibility that interest rates will go up.
You should think about the fact that a home equity loan will add another payment to your bills every month. It is also backed by your home. This means that if you don't pay back the loan, for any reason, your home is at risk. Don't forget to leave 20% of your home's equity alone so that you don't have to pay private mortgage insurance.
You might find that one or two lenders will give you an interest rate that is higher than the rest. You can find a lender who will give you the home equity loan you want at a fair rate, though, if you shop around and get a few quotes. Carefully compare them, paying attention to things like the interest rate, fees, and terms for paying them back. Also, stay away from home equity loans that have prepayment penalties. You don't need them.
