Learn How to Get a Mortgage When you’re Self-Employed
You can get mortgage approval even when you are self-employed
Being your own boss has its advantages.
You control your schedule and whom you do business with.
Ready to go on an exciting vacation? Just let your clients know when you’ll be back to work.
You don’t need to file a request form hoping another employee isn’t requesting the same days off.
While there is no denying self-employment has its perks, it can also have a disadvantage.
You may have some difficulties getting approval for a home mortgage.
Thankfully, there are self-employed mortgage solutions.
Start with a Traditional Financial Institution
Traditional financial institutions like banks and credit unions typically have an on-site mortgage broker for self-employed people.
This type of mortgage broker is the same as one specializing in traditional home loans, the only difference is they work with self-employed and freelance individuals.
You will still need to supply the usual paperwork associated with home mortgage applications.
It typically includes proof of income and your most recent tax returns.
Some brick-and-mortar financial institutions may require you to submit both personal and business tax returns.
Don’t be surprised if the mortgage broker for self-employed persons also inquires about your profit and loss statements. Referred to as a P&L statement, potential lenders use it to track your earnings compared to your business expenses.
A letter from a certified CPA (certified public accountant) is another document you may need to provide.
It is a method banks and credit unions use to verify your self-employment status and business income.
Try an Online Lender
It can be difficult to convince a traditional lender to approve your home loan application when you are self-employed.
Banks often prefer to loan funds to customers earning a more traditional income.
Working for an employer/company often provides financial institutions with a greater sense of security.
The mortgage broker is assured you will be earning a specific amount each pay period and they feel more confident you will be able to keep up with the loan payments.
Online lenders are often less rigid when it comes to a potential borrower’s type of employment.
You may also be able to secure a home loan at a lower interest rate. This can equal smaller monthly loan payments.
Have You Considered a Non-Qualified Loan
self-employed mortgage solutions include non-qualified loans (non-QM).
These types of loans are a viable option if you don’t want to collect all of the documents necessary to apply for a traditional home loan or cannot get approval.
Often known as no-income verification or alternative home loans, self-employed individuals can skip a lot of the paperwork and still receive approval.
Two common types of non-QM loans are bank statement and asset depletion.
The disadvantages associated with non-QM loans are the larger down payment and higher interest rates. However, it may be worth the higher costs when you are ready to purchase your dream home.
Being self-employed doesn’t mean you can’t get a home mortgage, only you may need to apply for a less conventional loan.