Getting a Mortgage When Self Employed May Be Easier with Our Guidance

Getting a mortgage when self-employed does come with some challenges, but the process is much easier if you're properly prepared.


getting a mortgage when self employed

There is a certain freedom in being an entrepreneur. No one telling you what to do or when to clock in … except for every one of your customers. But that’s another story. As satisfying as it may be to be your own boss, getting a mortgage when self-employed is not, shall we say, without some challenges.

Yes, you can certainly qualify for a home loan. Your path may just look a little different without the typical W2 forms and other paperwork that comes with traditional employment. But once you understand the differences and get your information in order, getting a mortgage when self-employed isn’t any more or less difficult than it is for anyone else.

Free Now!

Securing the best mortgage interest rates can save you a lot of money. Find out the best ways to get low interest rates … and other money-saving tips—revealed in this FREE report, Mortgage Interest Rates: How to Find the Best Interest Rates and Other Tips for Securing Low Mortgage Payments.

Getting a mortgage when self-employed is easier with appropriate documentation, work history, and tax records

Whether you are getting a mortgage when self-employed or have a standard full-time job, appropriate documentation is usually the most critical part of your application. Work history, tax records, proof of assets, and income are essential in letting a lender know that you will make your payments.

This can be a little more complicated for self-employed individuals for a few reasons:

  1. If you are newly self-employed, the lender will want some proof that your income is reliable and consistent (some lenders will look for two years of employment in the same job type).
  2. Many self-employed individuals write off expenses and show smaller profits or even annual losses (a business that doesn’t profit doesn’t earn trust in a lender’s eyes).
  3. Fluctuating income from one year to another can look like a risk to lenders.

While these are real challenges, it doesn’t mean getting a mortgage when self-employed is impossible.

Getting a mortgage when self-employed is easier with a bigger down payment

The beginning and end of decision making for a bank or lender is this: how big of a risk is this loan? Will the loan applicant make payments without issue, and if not, can we still profit? A larger down payment lowers their risk dramatically.

All the documentation, work history, and other information revolve around proving your creditworthiness, and it remains crucial. But, at the end of the day, if you are able and willing to take some of the risks off their table, that is in your favor.

The more of a down payment you can make, the more it will help you. However, you still need to prove that you manage your money reasonably and have a reliable credit history. It’s just that with a larger down payment, monthly payments will be smaller, and it will be easier to trust you.

Getting a mortgage when self-employed is easier with little to no existing debt

Having minimal or no existing debt goes back into the same story of being less of a risk for your lender. If you don’t have any other debts to pay, the lender will know you’ll have an easier time paying this debt since it will be your priority.

At the same time, having no history of debt can sometimes work against you. A complete lack of debt history gives them trouble in understanding how you work with debt. If you have college loans, car loans, personal loans, or other mortgages you’ve paid, they know you’re a trustworthy borrower. Without a history of debt, there is no way to know.

Overall, you’ll want to do everything you can to prove you are trustworthy. If you don’t have credit, get some. If you have debts, pay them down (or pay them off if you can). If you can make a more significant down payment, do it. Gaining the lender’s trust is your road to a mortgage.

What is your biggest challenge in receiving a mortgage when self-employed?

Free Now!

Securing the best mortgage interest rates can save you a lot of money. Find out the best ways to get low interest rates … and other money-saving tips—revealed in this FREE report, Mortgage Interest Rates: How to Find the Best Interest Rates and Other Tips for Securing Low Mortgage Payments.

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

Enter Your Log In Credentials

This setting should only be used on your home or work computer.

Need Assistance?

Call Financial Freedom Federation Customer Service at
(800) 777-2658

Send this to a friend