One of the most common questions surrounding refinancing comes from self-employed individuals. As a self-employed worker, can you still refinance your mortgage? The short answer is yes, but you need to take some things into account before you proceed. While refinancing as a self-employed worker is possible, you’ll face some challenges that others don’t.
If you want to refinance your mortgage, here are some tips to help you through the process.
Mortgage Refinance Tips for Self-Employed Wokers
Here are five refinancing tips you should consider if you are a self-employed homeowner:
1. Look Hard at Your Credit Score
Your credit report and score go through changes for a variety of reasons. Maybe you just invested in a new company vehicle or opened a new line of credit. When you refinance your mortgage, the lenders will check your credit history and score to determine your default risk and analyze your debt to income ratio. The details of your credit history should be accurate. That’s why it’s a good idea to check your credit report thoroughly before you apply for a new loan. If you see something suspicious, you need to report it to start the process of having it removed from your credit report. The better your credit score, the more likely you will be to get approval for low-interest mortgage rates.
2. Prepare Proof of Income and Other Documents
If you want to refinance, your lender must know you are earning consistently with the type of job you are doing as a self-employed individual. You’ll need to gather your present tax returns, bank deposits, and other important financial documents that prove your income. Many lenders will recommend you to have at least two years of tax returns. Furthermore, you will have to obtain your updated payoff balance and get other details about your existing mortgage from your current lender. The better documentation and records you have as a self-employed individual, the better the chances of your refinance application being accepted.
3. Be Prepared for Upfront Costs
Upfront and closing costs are something you also need to consider. They will vary from one lender to another with additional costs depending on the state in which you reside. The national average costs to refinance with additional tax are $5779. Depending on your loan size, closing costs could land between 2 to 6 percent of your total finance amount. Remember, your credit score, equity, and mortgage type could also affect the closing costs.
4. Talk to a Professional
Refinancing your mortgage can be an advantage if you want to acquire a better, more affordable interest rate improve your finances in the long run. Hiring a professional financial advisor is particularly important for self-employed homeowners who want to get the best results with their refinancing options. Not only will they help you find great rates, but they’ll also make sure you have all the documentation you need to seal the deal
5. Shop Around
There’s a lot of benefits to comparing rates and lenders. This allows you to choose the best rates and explore your options. Look at several mortgage lenders and narrow down your search before you apply. This will ensure you are comparing apples to apples when it comes to rates and terms.
Contact a Trustworthy Lancaster Financial Consultant for Your Refinancing Needs
If you need a reliable Lancaster refinance professional, All American Financial Services is here to help. Contact us today to discuss your options.