Self-Employed? Here’s the Secret to Getting Approved for a Mortgage!
As a self-employed professional, getting a mortgage might seem complex, but with the right guidance, it can be a smooth and straightforward process.
Our role as mortgage professionals is to ensure that you don’t feel overwhelmed by the requirements—because handling the details is what we do best.
Here's what you need to know about getting a mortgage when you're self-employed.
How Self-Employed Income is Calculated
When you’re self-employed, one of the most important steps in the mortgage process is proving your income. This is often the area that seems most complex to borrowers, but it doesn’t have to be. How your income is calculated differs from that of a traditional employee with a W-2, but with proper preparation, it’s just as manageable.
Typically, your last two years of tax returns will be used to determine your income stability. However, unlike traditional borrowers, self-employed individuals often take deductions that lower their taxable income. While this can be beneficial for taxes, it can sometimes complicate your mortgage application.
That’s where we step in—we’ll work with you to review your financials, including profit and loss statements, bank statements, and even contracts for future work if needed, so your real income is accurately reflected. Our goal is to make sure the underwriter sees the full scope of your financial stability.
We’re here to help you understand how your income will be calculated and guide you on how to present it in the best possible light.
General Requirements for Self-Employed Borrowers
The mortgage requirements for self-employed borrowers are generally the same as for traditional borrowers, but a few additional documents are needed to verify income stability. Here’s what you’ll need to have ready:
1. Two Years of Tax Returns: These help demonstrate your ability to generate steady income.
2. Profit and Loss Statements: If applicable, a profit and loss statement can give a clearer picture of your business's financial health.
3. Bank Statements: Bank statements can help verify cash flow.
4. Credit Score: Like all borrowers, your credit score plays a key role in determining what types of loans you qualify for and the interest rates you’ll receive.
5. Debt-to-Income Ratio: Your debt-to-income (DTI) ratio is also crucial. The lower your DTI, the better.
Types of Loans for Self-Employed Borrowers
Being self-employed doesn’t limit your loan options; in fact, many different types of mortgages are available to you. Here are some of the most common options:
Conventional Loans: These are available to self-employed borrowers who can meet the standard income documentation requirements. A strong credit score and a low DTI ratio will help you qualify for these loans with competitive rates.
Bank Statement Loans: If your tax returns don’t reflect your true income due to business deductions, a bank statement loan may be the perfect solution. These loans allow you to qualify based on your bank deposits rather than relying solely on tax returns.
FHA Loans: FHA loans are an option for self-employed borrowers who might need a lower down payment or have a lower credit score. While they come with some restrictions, they can be more forgiving of credit and income documentation.
We’re here to help you explore all of your mortgage options and find the one that best fits your financial situation.
Simplifying the Process for You
With our expertise and guidance, what might seem like a complex process becomes a manageable, stress-free experience. We specialize in helping self-employed borrowers like you achieve their homeownership dreams. Our job is to handle the fine details so you can focus on what matters most—running your business and preparing to move into your new home.
You’ve worked hard to build your business, and now we’re here to work hard for you. Let us help you secure the home you’ve been dreaming of!