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Self-Employed Mortgages

What Are Self-Employed Mortgages?

woman in front of a store | self employed mortgagesAre you an entrepreneur, contractor or an artist who is living their dream? When you’re one of the more than 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. However, there are several options for self-employed workers to get a mortgage.

The rules and guidelines are a little different than for people who receive a W-2 as an employee of company, but there are options to verify your income that will enable you to get a mortgage. Examples of documentation to prove your income include personal and/or business tax returns, 1099s, and Profit and Loss statements.

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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 employment or wage-earner income. This loan might be right for you if you're an independent business owner, contractor, or freelancer of any type. Depending on their financial situation, a self-employed individual is eligible for a variety of loan programs including Conventional, FHA, VA, USDA, or other loan programs. Each of these loan programs offer their own benefits. FHA loans, for example, are often used by first-time homebuyers due to the lower down payment requirements and more relaxed credit requirements than Conventional loans. Conventional loans, meanwhile, may be a more cost-effective option if you are able to qualify for one. 

How Can I prove I have Self-Employed Income?

Self-employed borrowers can use a few different items as proof of self-employment, such as their tax returns or bank statements.  

Why Is It So Hard for Self-Employed Individuals to Get a Mortgage?

If you are self-employed, it can be difficult to qualify for home financing because you may not meet the minimum eligibility requirements or have the traditional documentation necessary to prove income. However, the New American Funding team is experienced and prepared to help self-employed individuals successfully navigate the mortgage process.

What Should I Consider Before Pursuing a Self-Employed Mortgage?

  • Keep personal and business bank accounts separate to make it easier for your lender to look over your financial liabilities
  • Resolve any reporting errors on your credit report before applying. Lowering your credit utilization rate or consolidating debt may help increase your credit score
  • Avoid making big purchases prior to your loan closing as it may impact your credit score or affect your ability to qualify for a loan

When Can I Qualify for a Self-Employed Mortgage?

Self-employed borrowers can qualify for self-employed mortgages after at least two years of self-employment. However, some exceptions do apply. Some borrowers who have not been self-employed for at least two years may qualify after one year if they have documentation proving previous work and payment history in a like role. 

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. It’s also important to know that your business income needs to be verifiable through your personal federal tax returns or other documentation, including your business tax returns, a balance sheet, and/or a profit and loss statement.

Self-Employment Income Verification Requirements

Full Documentation

  • Borrowers must be self-employed for at least two years
  • Personal tax returns for past year including all schedules and attachments
  • Business tax returns for same year as personal with all schedules
  • A signed and dated Profit and Loss statement for 90 days
  • Business bank statements for 90 days with all pages

Our Self-Employment Mortgage Programs Available

  • Fixed 30-year
  • Purchase, Refinance and Cash-Out
  • First-Time Homebuyers
  • Warrantable Condos
  • Primary, Second home, or Investment home are eligible

We have a number of loan options for self-employed workers. Contact our team to learn more about how New American Funding's Self-Employed loan may be the solution to attaining home financing for your financial situation.

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