Self-Employed? 3 Tips to Get A Mortgage

Self-Employed? 3 Tips to Get A Mortgage


If you’re self-employed, getting a mortgage can be a lot harder than it is for someone who has a full-time job working for somebody else. So what can you do if you want to buy a house but don’t have a full-time job? I’m Ilyce Glink with today’s Real Estate Minute The good news is most lenders are willing to work with self-employed borrowers once they’ve taken a few extra steps. So I want you to follow these tips to smooth out your mortgage application process. First, you’ll need access to at least the last two years of your personal tax returns that show enough income to qualify you for the mortgage you want. And, depending on the type of business you own, you might have to provide a corporate tax document. Be sure to let your accountant know about your plan to get a mortgage well ahead of time so that you can decide how your tax return will show enough income to qualify for a mortgage down the line. In addition, you’ll need all sorts of other documents, including personal and business account statements, a profit and loss (also known as a P&L) statement for the business, and even a business tax return, if applicable. You can expect to see lenders take a deep dive into your business docs, especially if you’re not wildly profitable. And, if you have a small ownership interest in other companies, you can expect them to ask for documentation pertaining to that business as well. Anything special or different about your financials means lenders are going to do an extra-deep dive, they’re going to be extra-interested, and they’re going to require all kinds of more detail. Next, lenders like to see that you have some extra cash in a savings account. It’s called “reserves” and when you’re self-emplpoyed, having even more cash on hand, such as 6 months’ worth of mortgage payments, may actually improve your odds of getting a mortgage. Keep your documents as organized as possible. A lender will want to see where certain deposits – like a cash gift may have to be documented with a letter stating no repayment is needed – where those came from and how you paid for major expenses. All of that is going to be top of mind for lenders. Now, if your credit isn’t perfect, you should think about offering the lender a higher down payment in order to offset a lower credit score. Or, consider an FHA loan, which allows lower credit scores and a higher debt-to-income ratio. Or, if a business partner or relative is willing to help ask if they’d be willing to co-sign your mortgage. Talk to a mortgage broker who deals with different sorts of lenders, different sorts of borrowers, some of whom may be better suited for self-employed individuals. I’m Ilyce Glink. For more details and links, visit my website thinkglink.com, where we’re rebuilding America one house at a time.

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About the Author: Oren Garnes

3 Comments

  1. So I've got a question for you, I am self employed. 2015 I pretty much broke even but 2016 has been much better, about 80k net. And the trend looks even better, will lender's take the average of the two years or look at 2016 and the trend? Should I calculate the mortgage I will qualify for according to 80K net? and btw my credit is about 700 and I do not hold any loans/CC Debts etc..

    Thanks in advance,

  2. Unfortunately, we see many people who ignore their taxes until they realize that they need it when applying for a loan.

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