Home Loans for Self-Employed People
- posted 1.21.2019
- Taylir Paynter
- Home Loans
Yes, You Can Buy!
The “gig economy” has become exponentially more widespread. And it’s not just those who are supplementing their full-time income as Lyft drivers or doing Postmates deliveries. Self-employed people have kept the world going ’round for decades. In the U.S., writers, designers, marketing and computer consultants have been working freelance, often for years. In fact, Forbes reported that, in 2017, the number of freelancers hit 57.3 million; and, by 2027, possibly 50.9% of the workforce will be freelance.
In addition to freelancers who cater to the corporate world, calculate in the millions of employees who work for themselves and/or receive a large portion of their earnings in tips, such as hairstylists, massage therapists, food servers, etc. Many self-employed have seasonal jobs or work half of the year – but may have limited employment during the other half. Think employees at ski resorts or lifeguards.
If you’re following your dreams to become an artist, writer, photographer, or heck, a food truck chef, it doesn’t mean you have to postpone another dream: owning a home. The fact is, you can own a home with the help of a Non-QM (non-qualified mortgage) loan from New American Funding. A Non-QM loan is a flexible, even customizable, option that allows for bank statements, investments or asset depletion as means of verifying your income.
Living 1099 in a W-2 World
As mentioned, there are many types of jobs and careers that don’t always align with the traditional income documentation required for a home loan. These generally include two years of tax returns, W-2s, two months of paycheck stubs, etc. Non-QM, which stands for non-qualified mortgage, is a loan created for creditworthy borrowers whose income isn’t accurately reflected via traditional means.
Non-QM can take six to 12 months of bank statements, for example, as verification of your income. Or, because of the loan’s flexibility, your Loan Officer can use one year of tax returns, six months of bank statements, Profit and Loss statements, etc.
Here are some examples of documentation options, which can also be found here:
1-Year Tax Return Program
- Borrowers must be self-employed for two years
- Personal tax returns for past year, including all schedules and attachments
- Business tax returns for same year as personal returns, with all schedules; if more than 120 days old, a signed and dated Profit and Loss statement is required
- Tax extension for current year not allowed
Bank Statement Program
- Personal or business bank statements going back six or 12 months
- 100% of eligible deposits for personal or business accounts included
- Profit and Loss statement required for last 12 months or previous year and year to date
Asset Depletion (purchase or rate-and-term refinance only, owner-occupied or second home)
- 60-day account history required
- 100% of vested retirement accounts or annuities for borrowers who are older than 59 ½ at date of application; 50% of vested retirement accounts or annuities if younger than 59 ½ at date of application
Speak to a Professional
If you’re ready to explore buying a home – or just want to get a high-level idea of your options – speak to a New American Funding Loan Officer. He or she will clearly lay out the programs available to you; how much you will need as a down payment; tips for optimizing your credit score; and other strategies that might help you qualify for the ideal loan. You can also ask about down payment assistance programs that might be available in your area.
If you’re following your passion, find out how you can still achieve your dreams – with a self-employment loan from New American Funding.
All programs subject to borrower and property qualifications. Not all applicants will qualify.