Getting a Mortgage Loan when You Are Self-Employed
The thought of qualifying for a mortgage can be stressful for many prospective buyers. If you are self-employed, you may have even more concerns. Even if you do not have a regular W2 or tax form from an employer, you can still qualify for a mortgage. There are some tips to follow, however.
Prior to the housing crisis and recession, many self-employed home buyers could simply attest to the amount of money they earned and that was it. Today, that is no longer the case. You will need to provide additional evidence beyond stated income. In order to document your income, you may be asked to provide business and personal income tax returns for the past two years along with financial statements. Documentation is critical when you are applying for a mortgage as a self-employed individual. Ensuring that you have all of the relevant documentation gathered together prior to applying for your mortgage loan can be a critical element in ensuring a fast turnaround. If any additional documentation is requested, provide it as quickly as possible.
You may also find that your chances of being approved for a mortgage loan increase if you are able to demonstrate that you have access to financial reserves in the event your business experiences a downturn. In the end, the lender simply wants to be assured that you can afford the home you are planning to purchase. Paying off consumer debt or consolidating your debts to a lower interest loan may also help in improving your cash flow while providing the lender with greater peace of mind regarding your ability to repay your mortgage loan.
If you are purchasing a home with your spouse who has a regular job, your chances may also be improved if your spouse applies as the primary borrower. You can then be listed as the secondary applicant. If that is not an option, you might consider asking a parent to co-sign the mortgage for you. It should be kept in mind that if you are not able to keep up with your mortgage payments, the co-signor will become responsible for the loan.
Although it is more challenging to obtain a mortgage loan today if you are self-employed, it is not impossible. With some careful advance planning, your dream of becoming a homeowner as well as a business owner can become a reality.