What Are Self-Employed Mortgages?
Are you an entrepreneur, contractor or an artist who is living their dream? When you’re one of the nearly 10 million self-employed workers, it can be difficult to attain home financing because, although you have an income, you may not have traditional documentation to prove your income. Examples of documentation include tax returns, 1099s, and paycheck stubs.
Home loans for self-employed individuals might also be referred to as "bank statement loans" or "Non-Qualified Mortgage (Non-QM) loans". These customizable loan programs allow for non-traditional means of income verification, including one-year tax returns, six to 12 months of bank statements, asset depletion income, and Profit and Loss statements.
New American Funding offers Non-QM loans, which may be ideal for self-employed borrowers.
Self-Employed Mortgage Benefits
This type of loan allows people who might be able to afford to purchase or refinance a home when they don’t have traditional, full-time employment or income-verification documentation. This loan might be right for you if you're an independent business owner, tipped employee, seasonal worker, artist, athlete, musician, or freelancer of any type.
If you have other means of verifying your income, such as your bank statements for the last six or 12 months, you may be able to qualify for a mortgage for self-employed borrowers.
What to Be Aware of
Self-employed professionals who intermingle their business and personal expenses make it difficult for a lender to accurately assess their overall financial liabilities and assets. Keeping business and personal bank accounts separate makes it easier for the lender to look overall at your financial liabilities.
You should check your credit score well before applying for a mortgage and resolve any credit reporting errors on the credit report. Lowering your credit utilization rate or consolidating debt may help to increase your credit score.
It is not advisable to close any of your credit card accounts, even if you’ve already paid them off. This is because your credit score takes into account how long you’ve had lines of credit open, like a credit card.
It’s a good idea to not make any big purchases just prior to your loan closing since this can impact your credit score or affect your ability to qualify for the loan.
Our Self-Employment Income Verification Options
Full Documentation (same as a traditional mortgage)
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 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; 70% of vested retirement accounts or annuities if younger than 59 ½ at date of application
Our Self-Employment Mortgage Programs Available
- Adjustable Rate Mortgage (ARM): 5/1, 7/1 (30-year term)
- Fixed 30-year
- Interest-only: 5/1, 7/1 (30-year term – available with full documentation only)
- Loan amounts up to $2.5 million
- Purchase, Refinance and Cash Out
- First Time Home Buyers Ok
- Warrantable Condos Ok
- Primary, Second home or Investment home are eligible
Give us a call to learn more about how New American Funding's Non-QM loan may be the solution to attaining home financing for your individual financial situation.