If you`re a contractor and wondering if you qualify for a home loan, the answer is yes – many lenders offer home loans for self-employed individuals, including contractors. However, the process of getting a home loan as a contractor can be a bit more complex than it is for traditionally employed individuals.
Here are a few things to keep in mind if you`re a contractor looking to get a home loan:
1. Documentation is key
When applying for a home loan as a contractor, you`ll need to provide extensive documentation of your income, including tax returns, bank statements, and any contracts or invoices you have from clients. In some cases, you may need to provide two years` worth of documentation to prove your income is stable and consistent.
2. Your income may be scrutinized more closely
Because contractors often have more variable income than traditionally employed individuals, lenders may scrutinize your income more closely to ensure that you can make your monthly mortgage payments. This means that you may need to provide additional documentation, such as profit and loss statements, to demonstrate that you have a steady source of income.
3. Your credit score matters
As with any type of loan, your credit score will be a factor in whether or not you qualify for a home loan as a contractor. Generally speaking, a credit score of 620 or higher is required to be eligible for a home loan. If your score is lower than that, you may need to work on improving it before you can qualify for a loan.
4. You may need to put down a larger down payment
Because lending to contractors can be considered riskier than lending to traditionally employed individuals, some lenders may require you to put down a larger down payment in order to secure a home loan. Depending on the lender, you may need to put down as much as 20% of the purchase price of the home.
In conclusion, getting a home loan as a contractor is possible – but it may require more work on your part to provide the necessary documentation and demonstrate your creditworthiness. Working with a lender experienced in lending to self-employed individuals can help make the process smoother and ensure that you get the best possible terms on your loan.