Continuing upheaval in the mortgage industry may impact self-employed borrowers more than the other kinds of consumers, and several seem to understand it already. The most often asked question nowadays from business owners and independent contractors are “How am I going to Qualify to Refinance in the market today? ” Thereâ€™s no simple answer, but we are going to discuss how business owners and other self-employed individuals can protect themselves from a potential mortgage nightmare by locking in fixed rates with flexible payments now and preparing themselves to meet the refinance documentation requirements of tomorrow.
Lots of self-employed homeowners view the information about the mortgage market getting tough on sub-720 FICO credit scores and”Stated” or”No Documentation” mortgage applications which allowed countless self-employed individuals to secure and refinance mortgages in the past, and are concerned that they might not have the ability to refinance or buy a new home, whether it be now or sometime In such ways, the self-employed seem as they may become the most prominent”victims” of what many industry pundits are calling for a”mortgage meltdown”, not able to qualify for mortgages that theyâ€™re already in, which can be for the most part adjustable.
More than any other type of debtor, self-employed individuals and business owners will probably be at ARM Adjustable Rate Mortgages, particularly option ARM negatively amortizing mortgages, further exposing them to the dangers of the upcoming few years of home prices leveling off or decreasing and interest rates likely to rise (to whom I say”Refinance now” and receive a fixed-rate loan with comparable payment options before it is too late).
Although itâ€™s true that business owners and the self-employed have had it fairly simple for the past 5 decades, with loose lending standards enabling many of them (myself included) to qualify for loans that their banks might have rejected otherwise, for the most part, self-explanatory borrowers enjoy stronger income compared to their wage-earning counterparts. So why do banks provide self-employed homeowners for a tough time? Self Employed people generally have a more difficult time producing the sort of documentation that banks have traditionally needed from mortgage applicants.
This was because underwriting guidelines before 2002 were significantly more strict than the guidelines we have seen over the last couple of years. While itâ€™s true that the mortgage business is starting to shed programs for subprime (read”credit scores under 720″) borrowers and might be losing plenty of its Stated Income, Stated Assets, No Income, and No Assets programs (known as”Alt-A” or”A-“), an individual must also bear in mind that so-called”A-Paper” lenders who cater to excellent”A” credit unions, along with Fannie Mae itself have made progressive changes to their basic underwriting guidelines to adapt business owners and the self-employed which wonâ€™t be easily reversed.
Alternative documentation which might be available to business owners is a complex subject, and we can not expect to cover it completely within the range of one article, but there are particular documentation criteria available today, and for the foreseeable future, which will enable self-employed borrowers to qualify for refinancing now and continue to refinance in the future. We are able to boil down the Significant problems to five key factors for self-employed borrowers to qualify for mortgage refinances today and down the street.