Mortgage Refinance Loans for People Who Are Self-Employed
Refinancing a home in today's market can be difficult even for the most qualified of borrowers. Because banks and other lending institutions are often less than eager to provide loans to self-employed individuals, entrepreneurs may find that their refinancing options are relatively limited, especially in light of the more difficult standards that have been put into place.
One of the most difficult things to deal with for self-employed individuals who are looking to refinance their mortgage is when it comes to proving their income. Because certain entrepreneurs may not get a regular paycheck, proving that they have a dependable income source may be next to impossible. With banks taking a much closer look at applicants than ever before, it may seem like an impossible task.
The first thing to understand is that the new standards have made it difficult not just for self-employed individuals, but for just about everyone across the board. Lenders are required to make sure that borrowers meet minimum debt to income ratios and that they have the ability to pay back whatever loans they qualify for. Even lenders that have traditionally been quite favorable the first time homebuyers and self-employed individuals, such as the FHA, are required to meet stricter guidelines than ever before.
What this means for self-employed people is that it is more important than ever before for them to provide the proper documentation when applying for a home loan or when interested in refinancing their current mortgage. Limited documentation can make it virtually impossible for self-employed applicants to get the refinancing that they are interested in. With this in mind, entrepreneurs and individuals who work for themselves would be well advised to take a little time to track down all the necessary tax forms or payroll information that they will be required to submit to a lender so they are prepared initially rather than finding themselves scrambling to find the proper paperwork once the application has already begun.
Another thing to keep in mind when it comes to refinancing, and this applies to everyone, is that it is not always the best option out there. Even if a person can easily qualify for refinancing, they may find that simply making prepayments is a better option when it comes to saving money over the long term. This is because there are no closing costs or other fees, no application process, and, unless an individual qualifies for a significantly lower interest rate, they may not actually save nearly as much as they planned over the long term with refinancing.
It should come as no surprise to people who are in the business of helping individuals achieve their goal of homeownership that rising home mortgage rates can have a dramatic effect on the number of houses that are sold. Because purchasing a home is often a lifetime commitment, many individuals are more than willing to wait a few months until mortgage rates are more favorable rather than purchasing a home at a higher rate than what was available just a short time earlier.
According to Freddie Mac, a mortgage finance company, a fixed rate 30-year mortgage reached an average rate of 4.28% recently. Although that is still relatively low, a rising rate is likely to put many buyers on hold as they wait to see whether or not rates will drop again, allowing them to get the most favorable terms possible when it comes to their next home loan.
Currently, the national inventory of homes would take approximately 5 months to sell. Most industry experts agree that six months' worth of inventory is healthy for the market.
The issues that caused the housing crisis a few years ago are still fresh in the minds of realtors, home buyers, and even lenders, making everyone a little bit more cautious when it comes to actually signing on the dotted line and taking possession of their new home. On the plus side, this also means that many homebuyers are more informed and better educated than they were just a few years ago.