Being self-employed has its perks—But when it comes to securing a mortgage, things can get a little trickier. Traditional lenders often require standard documentation, like W-2 forms and pay stubs. Even business tax returns might be tricky with write-offs dragging down traditional qualifying income calculations. Don’t worry! There are plenty of options designed specifically for self-employed borrowers to help you get into your dream home or refinance your current one.
If you’re self-employed, consider these programs that make it easier to qualify for a mortgage:
- Bank Statement Loan Programs.
- What are they? Bank statement programs let you use your business or personal bank statements and qualify you on a percentage of average monthly deposits – no traditional income verification needed! These programs are tailored for self-employed individuals who may not have a regular paycheck or W-2s.
- Why it’s great for you: No tax returns required: Skip the complex tax paperwork. Flexibility with income types: Whether you’re a freelancer, entrepreneur, or contractor, this option works with your cash flow. Fast approval process: Bank statements are typically easier to gather than other forms of income documentation.
- How it works. Lenders calculate your average monthly deposits over 12-24 months and look at 12-24 months of bank statement to assess your ability to repay the loan. You can qualify based on your deposits, providing a more realistic picture of your income.
- Alternative Income Verification Programs.
- What are they? Similar to bank statement loans, these programs allow you to verify income through other means, like a profit and loss statement (P&L) or business records.
- Why it’s great for you: No traditional income docs: You don’t need to dig up your W-2s or tax returns.
- Simplicity: You can provide business-specific financial documents that better represent your true earning potential.
- How it works: Submit a P&L statement or similar documents to show how much money your business is bringing in, or the revenue you’ve earned over a set period. The lender evaluates your financials to determine loan eligibility.
- The 1099 Income Option.
- What is it? If you’re a freelancer, contractor, or consultant and receive 1099s from clients, you can use those to verify income and qualify for a mortgage.
- Why it’s great for you: Verifiable income: 1099 forms give lenders a clear record of what you’ve earned. Less hassle: You’re using the exact same documents that report your income, which can make the process smoother.
- How it works: The lender looks at your 1099 income over a period of time to assess your total earnings. Depending on your business’s stability, you may need to show additional documentation to back up your earnings.
- Self-Employed Conventional, VA & FHA Loans.
- What are they? Traditional, conventional loans are also available to self-employed individuals. The difference is that you’ll qualify with 2 years of tax returns.
- Why it’s great for you: Better interest rates: If you can qualify using your tax returns the conventional, VA and FHA loans provide lower rates than a bank statement, P&L, or 1099 qualifying loans.
Homeownership is Within Reach!
Don’t let the traditional mortgage process discourage you. With the right program, you can secure a mortgage that works for your self-employed income. Whether you’re looking to buy your first home or refinance your current one, there are options that allow you to use your unique income sources for qualifying.
Ready to explore your mortgage options? Reach out to our team today at (206) 352-6453 and let’s find the best fit for your self-employed journey to homeownership!
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