Tag Archive for: self employed

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!

 

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