Here are some tips on getting a mortgage that will help you avoid common pitfalls. Many self-employed individuals over extend themselves and then never file their income tax returns. However, if you're buying a house and obtaining a mortgage, you must prove your net income with the income tax you pay. The simplest way to do this is with your yearly tax return. If you receive a salary and receive paid leave through employment, you must subtract (K-1) your earned income from your net income to calculate your taxable income.
Another common mistake among self-employed borrowers is that they go with a mortgage lender that specializes in high-risk loans. Such lenders often have very inflated interest rates; consequently, a high percentage of borrowers lose their homes. Some of these foreclosure victims are able to remain in their homes for a year or two, but this happens rather seldom. Borrowers should shop around for a good mortgage lender who charges a reasonable rate. In addition, mortgage lenders must offer at least decent loan terms.
When you sign up for a mortgage loan, many lenders require you to take an exam called the National Credit Act exam. This exam assesses your credit worthiness and determines whether you can qualify for a mortgage. If you don't pass the national test, you have the right to take the pre-licensure class. It is important that you take the pre-licensure course, even though it will cost you some money. A pre-licensure course will improve your chances of qualifying for a mortgage.
To take the pre-licensure class, you must register with a reputable mortgage brokerage company. You then need to pay for the course through the mortgage brokerage company's agency fee. Some mortgage brokers charge a flat fee for the class, but there are also others that charge a percentage of your loan amount for the course. Before paying for the pre-licensure course, read carefully all the conditions laid down by the broker.
Mortgage brokers usually deal with only one or a handful of lenders, and if the interest rates offered by the lenders are too high, borrowers may find themselves trapped between a rock and a hard place. Some lenders increase the interest rates without warning, which can make life extremely difficult for the borrower. To avoid this hassle, research other lenders and compare their interest rates.
Before registering for any mortgage brokerage course, make sure you know the difference between a standard mortgage broker and a subprime mortgage broker. A standard mortgage broker lists loan products from several different lenders. Subprime mortgage brokers on the other hand only list loans from a select group of subprime lenders. Research which group will offer you the best loan deals. Ask questions regarding fees, programs and special offers to find out whether you will be better off dealing with them.
When working with mortgage brokers, it is important for the borrower to remember that they work for the lender, and not the other way around. The lender has the final say as to how much money they will lend to a customer. They have to be able to trust the information given by the borrower, especially since the borrower has already entrusted his property in their hands. This means that the lender has to trust the honesty of the borrower in returning the loan and fulfilling the other requirements stipulated in the contract. Borrowers should do some research before signing any kind of agreement with mortgage brokers.
A useful tip for homeowners is also to keep a record of their income and expenses. This enables them to calculate their monthly payments. Homeowners can use this information to calculate their interest charges, which they can then reduce if they find it difficult to pay the mortgage in full. This works even for borrowers who use conventional mortgages, but since they cannot plan ahead, they will have to deal with the consequences. A mortgage lender will give a percentage cut of their loan interest to compensate for the extra risk.