Gone are the stated income mortgages that were popular among self-employed home buyers during the early 2000’s. If you are self-employed, that doesn’t mean your chances of getting a mortgage are gone, it just means that you are likely to need to more documentation than other home buyers. No matter what your job, the key to getting a mortgage is being well prepared with the necessary paperwork.
As a self-employed individual, expect that you will likely need to provide tax returns in addition to other financial documents so your mortgage lender can get a good sense of your financial background. It may take a little longer to complete the underwriting of your mortgage than someone who is paid and receives a W2 but it isn’t impossible. It is absolutely essential that you have the necessary paperwork to share with your mortgage lender if you want to be qualified for your mortgage. Prior to starting the home buying process, talk with a mortgage lender and ask them what all you need to have. Then, go ahead and get all of that paperwork together. It’s not unusual for the lender to come back to you during the underwriting process and ask for additional documentation. If they do, get it to them as quickly as possible so it doesn’t delay closing on your new home.
When you are self-employed and preparing your taxes, you likely document as many expenses as you can to reduce the amount of taxes you have to pay. While that may be good at tax time, it may look like you don’t have the necessary income to support a mortgage and other household expenses if you are showing too many deductions. While your income when you are self-employed can fluctuate drastically, having a significant emergency fund may provide additional confidence to the lender so they will feel like you have the necessary reserves to pay the mortgage should your income change.
If you are purchasing the home with another individual that isn’t self-employed and there income is high enough to qualify for the mortgage, consider doing it just in their name or putting them as the primary borrower and you as the secondary borrower. This will make your income less significant so the lender won’t put as much weight on it and therefore may be more likely to approve the mortgage application.
When you are buying a home, you will often hear how important location, location, location is. A mortgage when you are self-employed is similar but the key word should be documentation, documentation, documentation. As long as you provide the documentation and have the income to support the mortgage, you should have no problem getting a mortgage as a self-employed worker.
Contact me today for a consultation. I will be happy to answer any questions you may, help you determine the value of your home or help you find your dream home.