One Savvy Mom ™ | NYC Area Mom Blog: How to Qualify For a Mortgage When You're Self Employed

How to Qualify For a Mortgage When You're Self Employed

How To Qualify For A Mortgage When You're Self Employed

There are a plethora of benefits to being self-employed, from the freedom it provides to the possibility of making a nice paycheck. Yet, there are also many hurdles that self-employed individuals must face when it comes to certain areas of life; such as buying a home.

From proving your income to getting a loan to proving paychecks and more, it can be a challenge to prove that you’re financially stable and able to pay your mortgage as a self-employed individual. The good news is that all hope is not lost and there are ways for you to qualify for a mortgage. Take a look.

How To Qualify For A Mortgage When You're Self Employed

What Do Lenders Expect From You?

For you to qualify for a mortgage, you’ll need to convince a person in particular: the lender. With self employment stated income loans or any loan that has to do with buying a home, the lender is going to be checking to make sure you’ll be able to pay for years to come. To help you understand if you’re at a point to buy a home, here are top things that they’ll be looking for:

        What you do for a living and where you do it.

        How stable your income is.

        How much money you make: your financial strength.

        Will you be able to continue to create this income in the future?

These are a few reasons why it can be a bit difficult for self-employed people to get a mortgage, as most lenders will deem someone with a stable job to be in a better position to pay off their mortgage.

Things That Can Help You Prove Your Ability to Pay

You may make great money as a content creator or Hollywood personal trainer. In fact, you may be making more money than you would if you worked in one job but you may also have some ups and downs with clients and gigs, with your monthly income fluctuating. To verify employment for the lender, you can consider various alternatives that can help prove your ability to pay your loan.

From a letter from a client to your personal accountant, or an organization you may be affiliated with, as well as any license you have for what you do, are all ways to prove that you are a professional in your chosen industry and have the means and ways to continue producing a stable and reliable income.

Aside from the word of other people you work with or do business with, proving your income with documentation can also help you a lot. From your tax returns to profit/loss forms, etc., being able to show that you have a stable income that you’ve been getting for more than two years can do a lot in helping your efforts to be approved for a mortgage.

How To Qualify For A Mortgage When You're Self Employed

Ways to Beef Up Your Application

If buying a home is in your future and you’re preparing to get approved in the next few years, here are some tips that can help your chances be that much higher.

  1. How’s your credit? It’s important to do what you can to have good credit. You want to get the highest score possible, as lenders will look at your habits at paying off your credit card payments. If it’s not where it should be, do your best to start paying it off.
  2. How’s your debt? If you are actively paying off your debt on a monthly basis and your debt to income ratio is low, your position to be approved could be more favorable as, again, lenders want to see that you have habits and the possibility to effectively pay your mortgage on time.
  3. Do you have a business bank account? If you have business expenses in your self-employed work, do you use your personal account to pay them? It could be beneficial for your future to keep a business credit card for business use and keep those expenses separate from your personal expenses.

In Conclusion

It could be a bit trickier for a self-employed person to get approved for buying a home than someone who has been in the same job for years, but it’s certainly not impossible. These tips can help put you in the right position to get that loan and succeed in getting the mortgage you want.