Applying for a mortgage when you are self-employed requires you to go through a slightly different lending process than buyers who are traditional employees. There are also some additional things you need to keep in mind when it comes to your business and personal finances. Let’s go over some recommendations to help you navigate the self employed borrower process smoothly.
- Choose a mortgage company that lets you apply with bank statements. Employees are able to apply for a mortgage by providing their W-2 tax forms as verification of their income. You don’t have a W-2 if you do not have an employer, so you cannot go through the traditional mortgage process to buy a home. Big banks often turn away self employed borrowers because they do not have this form. But Blue Square Mortgage offers bank statement loans. You can simply provide us with bank statements to prove your income, and proceed with the process of buying a home.
- Work with a company with ample experience with mortgages for self employed people. Some companies are more experienced than others when it comes to navigating the self employed mortgage process. Blue Square Mortgage has helped numerous self employed borrowers in Washington State and Colorado to purchase a home successfully. We can anticipate obstacles and clear them out of the way in advance so you can quickly and smoothly complete the process.
- Keep business credit from damaging your qualifications. One of the potential complications of applying for a mortgage as a self-employed person is issues involving your business and personal credit. You are managing your business finances currently in one of two ways: 1-You are financing your business using your own personal credit. Or … 2-You are using business credit to manage your business finances. This is separate from your personal credit. If you have already separated your business and personal credit, that can make things simpler. The advantage is that your personal credit utilization, which is what is used when determining your mortgage eligibility, will not be impacted by your business credit use. If you are using personal credit for business, then just be mindful of your borrowing leading up to your mortgage application. If you are planning to utilize a lot of credit for your business soon, try to postpone it until after you apply for your home loan. That way, it won’t negatively affect your application.
- Document thoroughly and plan ahead. There is a lot of documentation you will need to verify your self-employment and income. You will need your bank statements, a profit and loss statement, tax returns, and some sort of proof of business such as a business license. You could also use insurance documents, or ask your accountant to draft a letter on your behalf. You need to show not only how much you are earning, but also your business’s long-term stability. So, you should try to prove how long you have been in business, not just what you make. Ask your mortgage company the exact list of documents that are acceptable for your application. While preparing to apply, you can also look into steps to boost your credit score, like checking your reports and paying off debts.
Buy a Home in Seattle or Beyond
Buying a home when you are self-employed can be simple and straightforward with the right mortgage company on your side.
Whether you are purchasing a home or refinancing in King County, the greater Seattle area, or anywhere in WA or CO, Blue Square Mortgage can walk you through the mortgage process. Please give us a call at (206) 352-6453 to schedule your consultation.
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