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How Being Self-Employed Changes Your Approach To Securing a Loan

Submitted by Cheryl Bourland on September 27, 2023 - 5:11pm
pen and a pair of glasses on top of a tax returnWhen you are trying to qualify for a mortgage and you are self-employed there may be some hurdles that you may have to deal with that other buyers do not. It is not out of the realm of possibility to be able to get a mortgage that is a good fit for you and your family; you just have to be sure to have the documents to support what your financial status has been for the past few years. 

The first thing that you should have in order to start your search for a Lender is to have proof of what your income has been for the last few years. This should be a combined total of all taxable income from every source whether it is a side job that you do to a business that you own and is in your name. Whomever you try to go through to get a loan they will want to see that you have been able to have a consistent flow of income that is steady and reliable. There are a few ways to show this and it mostly stems from your personal and if applicable your business tax returns. If you have a business they often would like to see an up to date profit-loss statement or even a balance sheet that can show how you and your business have been making money.

For the traditional “9 to 5” worker a simple W-2 can show a steady employment history but by being self-employed you may have to be your own best cheerleader and provide a series of documents that help establish your own work history. Keeping good records is key to being successful at showing all of your business and work related endeavors. Letters from current clients and a certified letter from your Certified Public Accountant (CPA) can be a testament to your work. If you do have a business it is helpful to be able to produce proof that your business carries insurance and that it is licensed in your name. It is helpful to know that if you have previous W-2 statements from past employers with the last few years they may be included to help establish a good work history as well. Lenders like to be able to see a full picture of how they can expect you to pay on your mortgage for years to come.
 
The way that self-employed people can best help themselves is to be able to show a Lender that they can take on the responsibility of a mortgage and it not be too much of a burden. Being self-employed is not a negative thing in the eyes of a mortgage lender but you must have the necessary paperwork to back up your financial picture that you are giving to them. If you have any questions or need any advice about starting the home purchasing journey please contact our office and one of our agents will be happy to assist you.
 
Check out the article Qualifying for a Mortgage When You're Self-Employed for more information.