How You Earn Income Is Key
If you’re self-employed, contracted, or have any sort of variability in your income, obtaining financing can be tough if the right questions aren’t asked, and the right lenders aren’t targeted.
To assess a borrower’s ability to repay a loan, a lender will want to know the source of the borrower’s income. In some cases, this is straightforward. In other cases, it can be more complicated. Complicating factors include if the borrower is self-employed, if they earn salary plus commission, or if they earn a combination of salary plus bonus.
In addition to knowing the source of income, a lender will also want to know the stability of that income source. Sales positions that pay high commissions, including real estate sales and auto sales, are often considered “less stable” by lenders. Those who are self-employed such as contract consultants are also considered less stable. Lenders will be extra cautious when looking at income from individuals in these fields because they want to ensure there has been a relatively consistent history of earnings for at least two or three years.
It’s important for individuals in these categories to understand the lending options available to them. Every lender has different policies when it comes to how they account for income sources, and some lenders have programs targeted toward individuals who are self-employed or who have “less stable” income.
At The Blake Wilson Group, many of our clients are self-employed, or they work in positions where a high proportion of their income is variable. Without proper guidance, and up-front planning, individuals may be denied financing. We’ve often obtained financing approvals for our clients after one or more failed financing attempts elsewhere. We find these failed attempts are most commonly attributed to an incomplete or inaccurate understanding of their business and how they generate income, and failure to provide the appropriate documentation to the lender.
Contact us to discuss the specifics of your unique situation. It’s likely we can help.
You Dream It. We Finance It.
