Self Employed? A Mortgage is Possible: Here’s what to expect if you have a variable income
Don’t believe it if someone tells you that an entrepreneur or small business owner can’t get approved for a mortgage—there are plenty of self-employed borrowers enjoying their own homes. But like any life change, it’s important to approach the mortgage process with your eyes wide open, and you should plan to come prepared to mitigate any potential issues. Here are some things to keep in mind:
Expect to supply plenty of documentation
Lenders need to know that you’re a good risk, which means they need to know it’s likely you will pay back the loan. So you’ll need to show your track record in the following ways:
Verifiable employment history of at least two straight years
If you’re a first-time homebuyer, banks and mortgage lenders require you to verify your last 24 months of employment with minimal unemployment gaps, and that includes school or college for new graduates.
Rental history (or mortgage payment history)
You’ll need to show proof of your last 12 months of housing history. If you’re a renter, your landlord can provide this documentation. Try to pay landlords with checks rather than cash if possible, so you’ll have records from your bank if necessary.
Assets and money matters
You should be able to verify up to two years of stable self-employment income using your federal tax returns. To help review and predict your employment stability, your mortgage lender will also consider:
- Your location and type of business
- Demand for your product or service
- The current financial strength of your business
- A signed statement from your accountant
- Your businesses’ future outlook
Finally, to buy a home as a self-employed worker, you will also need good credit and limited debt. As with any other applicant, try to pay off any credit card debt before applying for a mortgage.
To find out more about the pre-qualification process, or to find out which mortgage is right for you, contact an Open Mortgage loan originator today.