I think the first thing to consider is a professional loan originator who can actually complete this type of loan process. Why do I say that? Well, there are many reasons why the loan can get denied out primarily on how income is derived.
But in the section we will only discuss what adjustments are in the interest rate sheets. They are as follows:
- FICO score: If you middle score is above 720, you will receive the lowest rate adjustment. 700 FICO and below can start effecting your rate.
- LTV (Loan to Value): Most banks have a tier system in terms of rate versus LTV. So the lower the LTV the better the rate adjustment.
- DTI (Debt to Income): When your debt to income ratio exceeds certain thresholds, the banks will consider a certain amount of risk. The lower the DTI the better! For self employed loans, it can go up to 43% and some instance up to 50%, but again the interest rate will be higher.
- Property Type, Loan Amount, Cash out are some other adjustments to the rate.
- Income Documentation: If you have to go with bank statements to get approved, there is a rate adjustment.
Note: Each of the adjustments described add up to create your true interest rate. The best practice is to know your financial situation, i.e., FICO score, monthly income, etc., and work with a seasoned professional to assist you with the loan.
Lastly, we have written a free report on the 19 things to consider to qualify for a self employed loan. It’s free, has a checklist and calculator to assist you!