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Homestead Financial Mortgage

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How Can I Get a Mortgage if I’m Self Employed

For many small business owners, the economy has been tough. With tightening mortgage regulations, qualifying for a mortgage has been tougher, causing many applicants to ask, “How can I qualify for a mortgage if I’m self employed”.

Here are 5 tips for a smooth mortgage application for a self employed person.

1.      Understand the income you make:

Ever heard of the saying, “Give me the bottom line”? The saying has roots in the financial industry.  Sure you may have grossed $150,000 last year(Top Line), however, writing off $140,000, leaves you with a Bottom Line of….you guessed it $10,000. So lenders are forced to qualify a borrower making $10,000 per year which won’t buy you much of a home in this day and age.

Gone are the days of writing your income on a loan application with no supporting documentation. Today all qualifying income must be documented.

2.      Keep a separate business bank account:

This one is important if you have a car or credit card that the business pays for. For example, if John owns John’s Painting Company in St. Louis and pays for his Chevy truck out of his business account, the debt won’t be counted against his mortgage application.

3.      Document! Document!

With very few exceptions, lenders are requiring 2 years tax returns for all self employed applicants. In the case of business owners that own a separate corporation, 2 years personal returns and 2 years corporate returns are required.

4.      Know your Credit Score.

The industry standard qualifying score has moved to 640. However, the national average is approximately 690. Coupled with the risk “layer” of being self employed, the higher your score, the smoother your loan application will be.

5.      Show your assets:

Similar to #1. No mattress money. The more assets we can show, the more likely you look to be able to weather any financial storm that may hit.

To summarize, rates are low, and those same amazingly low rates are available to all of those that can document what they make, it just takes a little more work and planning!