If you need a mortgage to buy a home as a self-employed, you must fill out the same mortgage application form as others. Mortgage lenders also consider your asset, credit score, and how much debt you have before approving your loan. Since self-employed workers don't have a traditional salary, you must work harder to prove your earnings before getting approved for a mortgage. With that in mind, here are some tips to help you get approval for a mortgage when self-employed.
Determine if you need a mortgage.
You will be classified as self-employed if you own over 25% of a business or work as an independent contractor. A lender will also consider you self-employed if you work for an organization that provides you with 1099 for your services instead of a W-2. However, the mortgage you can get as a self-employed borrower will depend on your business type and the lender.
Consider requirements for a self-employed mortgage.
Your requirements to get approved for a self-employed mortgage will differ by lenders. Expect to be assessed on your business's financial health, viability, and years of experience as a business owner. In addition, a mortgage lender may consider the following when reviewing your application.
- Income stability
- Business operates.
- Years you've been self-employed
- Business income and Personal income
Gather proof of your self-employed income.
A lender will likely ask the following to get a mortgage when self-employed:
- Your most recent tax returns, if applicable
- Your most recent personal tax returns.
They may also ask you for IRS transcripts, loss and profit statements, CPA letters, and documentation of business funds that you want to use for a down payment.
Understand how lenders or banks analyze self-employed income.
The method lenders or banks use to calculate your income varies, depending on whether your business is a sole proprietorship, corporation, or partnership. Most lenders or banks use Fannie Mae's cash flow analysis Form 1084 to calculate self-employment income. A lender or bank will consider your net income — gross income minus the fees you incur for doing business to determine whether you qualify for a self-employed mortgage. Lenders want to ensure your business is healthy financially. They may also examine how much debt your business is currently taking on and whether the income is increasing or falling yearly.
Shop for the best mortgage.
Some self-employed mortgage lenders offer conventional loans and Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), or U.S. Department of Veterans Affairs (VA) loans. Don't forget to compare mortgage rates from other lenders or banks until you find someone who can guide you through the steps of taking mortgages for self-employed.
Contact For Help With Mortgage For Self Employed FL
Here at Savvy Mortgage Services, we've been in business for years providing mortgage services for people in Florida. We offer the service you need for end-to-end processing all under one roof. Contact us today at 786-527-0200 to learn more about mortgages for self-employed in FL and get a quote.