If you are self-employed and hoping to buy a home in California, there are going to be some hurdles in your way with many of the application processes. Many self-employed people wonder how they will be able to become homeowners because the traditional mortgage application process is designed for someone with a traditional job and predictable income.
There are a few reasons that applying for a mortgage as a self-employed person can be difficult. One of the keys to success is working with a lender who understands self-employed people and has the creativity and solutions you need. To learn more about how we can partner with you as you pursue your goals in real estate, contact us any time.
Want to understand why it’s so challenging to apply for a mortgage while self-employed, and what you can do to help the process? Keep reading.
Why can’t I qualify for a mortgage while self-employed?
The simple answer comes down to verified income. The typical mortgage application process involves showing the lender your pay stubs, tax returns, or possibly other documentation to verify your wages. This is the simplest way for the lender to see what your income is and determine how much you can afford to borrow.
As you likely know, when you are self-employed your income may not be so consistent, predictable, and verifiable. You may be making more than enough money to qualify, but the tax returns may not show the whole picture.
Because of this, no matter how great your credit is or how low your DTI, a lender looking at your application won’t be able to approve it.
Bank Statement Loans
Everything we’ve said so far applies to conventional mortgages, FHA mortgages, and other common loan options. When you are self-employed, you might need something called a Non-QM, or a non-qualified mortgage. Simply put, a Non-QM is a mortgage that allows you to qualify based on alternative methods of income verification.
We offer a self-employed bank statement loan, where you will qualify based on either 12 months of personal bank statements or 24 months of business bank statements rather than your tax returns. We will take the average monthly deposits over that time span as your verified income.
This allows you to provide simple documentation to show that you are able to buy a home, even if your income is coming from various sources and is difficult to display in a pay stub. We know that being self-employed often means being creative and innovative, and that same entrepreneurial spirit that is leading you to successfully start a business is helping you build financial success from multiple directions.
With terms that work for your unique scenario, your dream of becoming a homeowner can come true. We can offer bank statement loans in a variety of terms, including 5/1 ARM, 7/1 ARM, and 10/1 ARM. We have both 15 year and 30 year fixed available. There are even interest only options.
If you have a 680 credit score or above and bank statements that can show your readiness to invest in a home, we wan to partner with you to help you reach your goals.