The thought of qualifying for a mortgage can be stressful for many prospective buyers. If you are self-employed, you may have even more concerns.
However, even if you do not have a regular W2 or tax form from an employer, you can still qualify for a mortgage.
Prior to the housing crisis and recession, self-employed home buyers could simply attest to the amount of money they earned, and that was that. Today, that is no longer the case. You will need to provide evidence. In order to document your income, you may be asked to provide business and personal income tax returns for the previous two years, along with financial statements to back them up.
Documentation is critical when you are applying for a mortgage as a self-employed individual. Ensuring that you have all the relevant documentation gathered together before officially applying for a mortgage loan can be a critical element in achieving a fast turnaround. If any additional documentation is requested, be sure to provide it as quickly as possible.
You may also find that your chances of being approved for a mortgage loan increase if you are able to demonstrate that you have access to financial reserves in the event that your business experiences a downturn.
In the end, the lender simply wants to be assured that you can afford the home that you are planning to purchase. Paying off consumer debt or consolidating your debts may also help in improving your cash flow while also providing the lender with greater peace of mind regarding your ability to repay your mortgage loan.
If you are looking to purchase your home together with your spouse who does have a regular job, your chances may also be improved if you apply for a mortgage loan with your spouse as the primary borrower, with you listed as the secondary applicant.
If that is not an option, you might consider asking a parent or other relative to co-sign the mortgage for you--though, keep in mind, if you are unable to keep up with your mortgage payments, your co-signor will be responsible for your loan.
Although it is more challenging to obtain a mortgage loan today if you are self-employed, it is certainly not impossible. With some careful advice and planning, your dream of becoming a homeowner as well as being your own business owner can become a reality.