As mortgage rates rise many consumers don't quite understand why they aren't being offered the 5.5% rate they saw on tv the night before. After all, they have great credit! Unfortunately you never have time or the magnification to read all of the fine print thrown up on the screen just before the end of the ad.
Many self employed borrowers write off much of their income for tax purposes. This prevents many borrowers from being able to do a "full documentation" loan. For each item of proof that you don't show to the lender, your rate is affected. So your FICO score may in fact be a 750, but you take a hit to the rate for stating your income and proving your assets, another hit if you state the assets, another if you choose not to disclose your employer, etc. So on a fully documented loan with 2-6 months of reserves proven and putting down 20%, you may in fact qualify for that 5.5%. The more likely scenario though is you wind up paying a rate of 6.5% and are required to show very little of your personal dealings. The other upside to this is that your loan should in fact close quicker than a full documentation loan.
Make sure that you discuss all of your options with your lender. If you sit down and are only given one option for a loan be sure to ask what else is out there. There are usually many different options and you should be given the opportunity to participate in the decision. Don't be afraid to ask alot of questions. How many questions do you think of to purchase a coffee maker for $40? You should have many more when you're spending $50-$500k.
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