Self-employed individuals are finding it more and more difficult to obtain mortgage loans in today’s economic climate. High credit scores are no longer enough to guarantee success.

As lenders require more and more verification of income, those without an employer and a W-2 form to present must show proof in other ways. Under new regulations, mortgage brokers are required to verify existence of the business by contacting an independent third party, such as a tax accountant, a regulatory agency, or the applicable licensing bureau. Their records must include how they gained contact information, the name of the person they spoke with, and their position.

Next, they must verify a telephone listing and address for the business by consulting telephone books, directory assistance, and/or the Internet. This research must also be documented in their loan files. This could present a problem for individuals who operate a business from their own homes, and those whose entire business is conducted over the internet or “on site” without benefit of a storefront.

In addition, mortgage brokers must obtain a copy of every individual’s income tax records and keep that information in the loan file.

Previously, borrowers were required to sign an IRS form giving the mortgage lender permission to obtain IRS records, and the lender could decide if or when to submit the form to obtain tax information.

Under new Fannie Mae guidelines effective September 1, the lender is required to obtain a signed Form 4606-T from all borrowers both at application and at closing. They then “recommend” that lenders obtain the tax transcripts prior to closing and use them to validate the income documentation used during the underwriting process.

This is the biggest hurdle for the self employed. After spending years carefully studying tax regulations and learning of every possible tax deduction, many very successful self-employed individuals appear to have hardly any income.

In the past, mortgage lenders were able to overlook certain expenses such as deductions for a home office and certain depreciation and add them back into the borrower’s income. This may no longer be the case, so self-employed individuals are being encouraged to be less aggressive in finding deductions.

Along with setting up a roadblock for the self-employed, this new regulation adds paperwork for the mortgage lender. Files are selected at random for quality control reviews, and those files must include the executing and reconciliation of the transcript information with the income documents in the loan file.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

If you believe even a small savings is worthwhile, then paying your credit card bills sooner is a money saving tactic you’ll love.

You pay the same amount, but the timing creates a few dollars of savings each month.

When you carry a balance on your credit cards you have no grace period, so you are charged interest every day until the bill is paid in full. Not only that, you’re charged interest on your average daily balance, which includes the interest added each day.

Considering that you probably are earning zero interest on money in your checking account and could be paying up to 29.9% on your credit card balance, it makes sense to make that payment just as soon as possible.

The more you owe on that revolving balance and the higher the interest rate you’re paying, the more you will save by shaving a few day’s interest off each month. If you make your payment on the day after your statement comes out you reduce your average daily balance for the current month by the amount of your payment.

Thus, if your payment includes a principal payment of $100, your average daily balance for next month will be $100 less if you pay it on the first day of the billing cycle than if you paid it on the last day.

At an interest rate of 18%, you’d save $1.50 by making that payment early. Not a lot, but when you’re trying to get out of debt, every small savings does add up.

You can also save on interest by making small payments in addition to your monthly payment. Even an extra $5 to $10 paid each week can make a big difference in the interest you pay over a year’s time. These small payments are easy to make if you’ve set up online bill pay for each of your credit card accounts.

Of course, if you have a sudden windfall such as a bonus check, putting a chunk of it down on your credit card bill the day it arrives can make a big difference in the interest you’ll pay.

Do remember that you need to wait until the statement is generated to make “regular” payments. A payment made the day before the billing cycle begins will apply to your principal balance, but if you don’t make a payment during the next billing cycle, you’ll still be considered past due.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.