Mortgage Options for Self-Employed Borrowers
Your Income May Not Fit Into One Box
Being self-employed can make the mortgage process feel more complicated, but it does not automatically prevent you from qualifying for a home loan.
Business owners often use legitimate deductions that reduce the taxable income reported on their tax returns. Although those deductions may benefit the business, they can also make traditional mortgage qualification more challenging. The important step is reviewing your complete financial picture and identifying the documentation and loan program that fit your circumstances.
Ways Self-Employed Income May Be Documented
Depending on the loan program, income may be evaluated using documents such as:
- Personal and business tax returns
- Profit-and-loss statements
- 1099 forms
- Business bank statements
- Verification from a CPA or tax professional
Some alternative-documentation programs may calculate income using 12 or 24 months of eligible deposits shown on personal or business bank statements. Other programs use tax returns but allow certain qualifying adjustments to the reported income. Not every documentation method works for every borrower or loan program. The appropriate approach depends on how your business is structured, how you receive income and how long you have been self-employed.
More Than Income Is Considered
Mortgage qualification also includes a review of:
- Credit history
- Current monthly debts
- Available down payment
- Financial reserves
- Business history and stability
- Property type and occupancy
- Overall ability to repay the loan
A strong business does not always look straightforward on a tax return. Reviewing the complete picture can help identify options that may have been overlooked during a previous application.
Previously Turned Down?
Being declined based on one method of calculating income does not necessarily mean every mortgage option is closed.
A different loan program, additional documentation or another method of reviewing self-employed income may produce a different result. Platinum Mortgage can review your situation, explain the available options and help you understand what may be needed to move forward.
Self-Employed Borrower Frequently Asked Questions
No, self-employed borrowers may qualify using eligible business or personal income when it can be properly documented and meets the selected loan program’s requirements.
Certain programs may use 12 or 24 months of eligible personal or business deposits. The lender must review the deposits, business expenses and supporting documentation.
That depends on the loan program. Traditional financing generally requires tax returns, while certain alternative-documentation programs may use another approved method to calculate income.
Possibly, loan program guidelines may evaluate self-employed income differently. A complete review is necessary to determine whether another appropriate option is available.
Let’s Review Your Unique Situation
You have worked hard to build your business. Your mortgage options should begin with a careful review of how that business actually generates income.
Contact Platinum Mortgage to discuss your income documentation, financial goals and available home loan options.
All loans are subject to application, credit approval, income verification, property approval and applicable underwriting requirements. Documentation standards, rates, fees, down-payment requirements and eligibility guidelines vary by loan program and are subject to change. This information is for general educational purposes and is not a commitment to lend.