Buying a home when you are self-employed can be tough, but it shouldn’t be impossible.
Here’s the challenge.
If you are self-employed and seeking a mortgage, your tax returns may not show your true income. Whether you are a doctor, lawyer, real estate agent, freelancer or small business owner, you are writing off business expenses, so that when you pay taxes, it is only on ‘taxable income.’ Net taxable income is the ‘adjusted gross income,’ which conventional bank and mortgage lenders will use to qualify loans for self-employed individuals seeking a mortgage.
Fortunately, there are new ways for the self-employed to qualify for a mortgage loan.
Now that entrepreneurs and the self-employed represent 30% of our US workforce, non-bank lenders have taken notice.
These lenders now offer a solution, for self-employed mortgage loans.
A new ‘Bank Statement Mortgage’ was designed for the self-employed with a more common-sense approach to qualify. A review of the business income deposited into your bank statements for the last 12 or 24 months is used to reveal a true reflection of your income.
The most important factor when you’re self-employed and buying a home with a Bank Statement Mortgage is to have a minimum down payment of at least 10%, plus your closing costs, and reserves. Closing costs will vary depending on the purchase price.
• How to Calculate Reserves
Reserves are your cash or liquid assets over and above the down payment and closing costs. Typically, you will need 3 to 12 months of reserves. You calculate the reserve amount needed by taking your projected new monthly mortgage payment, including taxes and insurance and multiplying that by 3 or 12. Your credit score and down payment will determine whether you will need 3, 6, or 12 months for reserves.
• Improving Your Odds for a Loan Approval
Each Non-Bank lender has its own criteria for analyzing business income. Therefore, the single most important step in getting qualified for a Bank Statement mortgage is in selecting a loan expert with experienced in income analysis and determining the maximum allowable qualifying income.
Ready to get started? Take the first step and download our free guide, The Ultimate Guide for Self-Employed Bank Statement Mortgages.
Are You a Self-Employed Borrower? Here's How to Get a Home Loan
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For more than 25 years, HomeLife Mortgage has built a strong reputation in California and Florida as a leading mortgage broker, servicing the needs of borrowers who have been unable to obtain conventional financing. HomeLife Mortgage is at the forefront of non-bank lending offering the next generation of mortgages including Jumbo Non-Prime Loans, Real Estate Investor Loans, Bank Statement Loans, FHA Loans and VA Loans.