Buying a new home is a dream for many self-employed individuals who find themselves held back by the hurdles required to submit an application. Unfortunately, there are some myths that continue to be perpetuated about how difficult it is to buy a home when you are self-employed, but with the right lender it’s a lot easier than you think.
The Myth of the “Complicated” Mortgage Process for Self-Employed Borrowers
One of the biggest reasons self-employed individuals hesitate to apply for a mortgage is the fear that their loan application will be more complicated than a traditional borrower’s. When you don’t have a W-2 or your tax returns show a much lower income than you’re bringing in thanks to deductions, verifying income can sound like a major headache.
The reality? The process is different, but it’s not necessarily harder. A knowledgeable lender will help you gather the right documentation, present your financial situation effectively, and guide you toward the best loan options for your unique situation. We have years and year of experience helping our clients understand the process and making the application process a smooth as it can be.
Documents We Use for the Approval Process
When we’re not working with a typical borrower and focusing on the W-2, luckily we have a few other ways to help get the job done. Instead of using a W-2 for income verification, we focus on:
- Income verification – Typically through tax returns, bank statements, or profit-and-loss statements
- Debt-to-income ratio (DTI) – To ensure your monthly payments are manageable
- Credit history – A strong credit score can improve loan terms
- Consistent income – We are looking for steady earnings, usually over a two-year period
If you deduct a significant amount on your taxes to lower your taxable income, you may show less qualified income than you actually earn. However, we have loan programs designed for self-employed borrowers that use bank statements or asset-based lending instead of tax returns to determine your ability to repay the loan. We know that you don’t have to be able to show your income on a W-2 to be more than capable of buying yourself a home.
The Benefits of Homeownership are Worth the Effort
Even if applying for a mortgage requires a little extra paperwork, the benefits of owning real estate far outweigh any short-term effort. It may help you get over the hurdle and begin the application process to consider how much you will benefit from buying a home.
While there are many benefits to homeownership, for many, these are some of the top benefits in regards to homeownership:
- Wealth-building through home equity – Instead of paying rent, you’re investing in your own financial future
- Tax advantages – Mortgage interest and property taxes can often be deducted
- Stability – No more worrying about rising rents or unexpected lease changes
- An appreciating asset – Real estate historically increases in value over time
The Importance of the Right Lender
The secret to a smooth mortgage approval? Working with a lender who understands self-employed borrowers. Based on our many years of experience finding unique financing solution for our diverse clients, our knowledgeable loan officers will:
- Help you choose the right loan program for your financial situation
- Assist in organizing the necessary documents
- Explain your options clearly and help you strategize for approval
If you’re ready to find the right financing for your homeownership goals, please feel free to contact us at any time with your questions or apply now to get the process started! We are excited to help make your real estate dreams a reality and help find the loan program that suits your lifestyle and income type best.
