LITTLE ROCK, Ark. (KTHV) -- Buying a home can be a challenging process, but it's even more complicated for those who are self-employed, newly employed, going through a divorce or have had a foreclosure or bankruptcy.
Here with tips on dealing with special circumstances is Scott McElmurry, President and CEO of Bank of Little Rock Mortgage.
When applying for a home loan, you have a source of income. For the self-employed, this can be more difficult to prove. Self-employed borrowers are required to provide documented IRS tax returns from the past two years and may have to show a current profit-and-loss statement. So if you are self-employed keep accurate records of legitimate business income and expenses and have your taxes professionally prepared.
Most lenders want to see a two-year history of steady employment. So if you are switching jobs - particularly in a different field or industry - it's better to wait until after you close on your mortgage loan. Of course, moving to a different job for better pay could work in your favor when banks evaluate your loan application.
Your job and salary are important because most lenders require that your mortgage payment be no more than 30% of your gross monthly income. The mortgage payment plus other debt should not total more than 43% of your gross monthly income.
For applicants who have recently found a new job following a long period of unemployment, you may have to wait at least six months before applying for a mortgage. It also helps if you have a substantial savings account set up and maintain an average credit score.
The option used most often is for one spouse to take the mortgage, but this often means the spouse also gets to keep the house. It is important to note that if during the marriage BOTH spouses signed the mortgage documents, they are BOTH responsible for paying the mortgage, so the mortgage-less spouse is still liable if the loan is not paid on time. To remove one spouse's liability from the loan, the property needs to be sold or transferred, or the mortgage can be refinanced solely under the name of the spouse retaining the property.
Qualifying for a home loan can be difficult with one of these events on your record, but it is possible to qualify after a period of time with a re-established credit history and steady employment record. The waiting period varies depending on the type of bankruptcy - Chapter 7 versus Chapter 13. And in the case of a foreclosure, homebuyers may have to wait up to 5 years for your next purchase. The important thing is to not assume that you will NEVER be able to buy a home again ... you just need to do more work to improve your credit and be focused on your financial future.