lenders Archives | The DSCR Company

Today we are sharing an article that discusses how to get a mortgage when you’re self-employed. Here are 8 key steps to help prepare for the process in order to get the best deal on your home loan:

1. Check if You’re Considered “Self-Employed”

To clarify, in the mortgage world, self-employed means you don’t get a W-2 from an employer.

A small business owner, freelancer, contractor, or gig worker
Receiving income primarily through 1099 forms

2. Calculate Income and Affordability

Lenders will look at tax returns, bank statements, as well as business profit-and-loss reports to determine your income. Next, lenders will calculate your debt-to-income (DTI) ratio.

3. Prep Credit and Savings

Boosting your credit score, as well as saving up a bigger down payment, can improve your chances of qualifying for a loan. It also can result in getting better rates. Therefore having at least a 620 credit score, or higher is ideal. A down payment of 20% is a good target.

4. Find the Right Lender and Loan Program

You have several loan options, including:

Conventional loans: Low down payment, but stricter income verification.
FHA loans: Good for lower credit scores, require 3.5% down.
Non-QM loans: For those who take significant tax write-offs or have fluctuating income. Examples include Bank Statement Loans and DSCR Loans.

5. Gather Documents

Self-employed borrowers need more paperwork than W-2 earners. Be ready with:

2-3 years of tax returns and business statements
Bank statements (personal and business)
Profit and loss reports
Business licenses, credit card and loan statements

6. Get Pre-approved

This gives you an idea of how much you can borrow and shows sellers you’re serious.

7. Lock in Your Rate

After finding a home and signing a contract, apply for your mortgage in order to lock in your rate to protect against increases during the underwriting process.

8. Close on Your Loan

At closing, you’ll sign your paperwork, pay your down payment, and receive the keys to your home.

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We are here to help you! Contact us today to see if a DSCR loan is best for you!

Today we are going to discuss an article regarding what’s next for DSCR loans in 2024 and beyond.

In 2024, DSCR loans may see new changes to better serve real estate investors. Medium-term rentals, which last 30 days to a year, are gaining popularity. Investors love the extra cash flow these rentals bring compared to long-term rentals. But right now, lenders haven’t created a standard way to qualify these properties. DSCR lenders will need new tools, like how they use AirDNA for short-term rentals, to keep up with this trend.

Single-room occupancy (SRO) properties, where homes are rented by the room, are also becoming more common. Many investors see great returns, but DSCR lenders are still cautious. Some think these properties are too risky to lend on, but this could change as the market evolves.

Another area to watch is manufactured housing. Investors want more DSCR loans for mobile homes. The challenge is that mobile homes can be moved, which worries lenders. But with stricter rules on things like foundations, we could see more DSCR loans in this space.

Finally, mixed-use properties, which combine residential and commercial spaces, are another area for possible DSCR loan growth. Lenders might open up more to these properties if they remain mostly residential.

These updates show that DSCR loans continue to evolve. Lenders and investors alike will need to adapt to these exciting opportunities.

Click here to read the entire article.

Do you have more questions regarding what’s next for DSCR loans in 2024 and beyond? Contact us today!

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How to Get a Mortgage When You’re Self-Employed