When you are self-employed, getting a loan can seem like a struggle. However, it does not have to be though, and you can get a home equity loan whether you are self-employed or not.
What is a Home Equity Loan?
When you get a home equity loan, you take your home equity to use as collateral. The homeowner borrows against the equity of the home. The amount of the loan is decided by taking the balance due on the mortgage and the market value of the home and finding the difference. It is a loan for a fixed amount, and you repay the loan over a set period by making monthly payments. You can get a home equity loan for a period of five to thirty years. Home equity loans have lower interest rates than other loans available. These loans help you get a secured loan that can easily get you a good sum of money in a reasonably short time.
Tips for Self-Employed to get a Home Equity Loan
Here are some tips for getting a home equity loan if you are self-employed.
Have Proof of Income
Whether you are self-employed or not, you will still need to show the lenders you have an income. You will need to prove income when obtaining a loan. When you are self-employed, however, there will be an emphasis on your income. You will need income statements to prove your income for various periods of time. You can also use bank statements, tax returns, and tax return transcripts to prove income.
It is good to be able to show two years of consistent income.
Find a Co-Signer
When you apply for a loan with a co-signer, it adds security in paying the monthly payments. The co-signer is just as responsible as you are to make the monthly payments. If you are unable to make the payment, the co-signer will have to do it.
Check your Credit Score
Before you apply for a loan, check your credit rating. You will need to see if there are any issues or irregularities, and if there are any, take care of them as soon as you can. Any changes can take around two months to show on your report. A good credit score will help you get a good interest rate.
Look at Your Options
You will have the opportunity to look at several lenders and what they have to offer. Each lender will have different interest rates and terms, as well as different conditions. You will have to look at each offer and see what works for you.
Remember Other Costs
Make a list of all your bills and other expenses. You should have enough left over to pay your loan each month, without struggling. By being aware of your costs, you will be able to make sure you pay your loan each month to prevent any default on the monthly payments.