Self-Employed Loan

A self-employed loan is a home financing option designed for business owners, contractors, and freelancers. It’s designed to accommodate those whose income is not predictable or regularly documented, making it easier for self-employed individuals to get pre-approved for their dream home.

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What Is a Self-Employed Loan?

Self-employed loans are mortgage options for people who work for themselves or have their own businesses. Though being self-employed may feel like a challenge to obtaining a home loan, we offer programs that allow you to qualify based on other factors such as business revenue, expenses, and other financial documentation that helps establish eligibility. By not relying on traditional income verification and using alternative documents such as bank statements and 1099 documents as part of the application process, we make homeownership accessible to self-employed clients.

Requirements for
Self-Employed Loans

Eligibility for a mortgage as a self-employed individual is determined by several factors. While requirements may vary among lenders, here are some common criteria and documentation you will need.

Income History

Lenders want to see a stable income history to determine your ability to repay the mortgage. Ideally, you should have a minimum of two years of self-employment income.

Proof of Income

To verify your income, you will need to provide the following documentation: personal and business tax returns, a year-to-date profit and loss statement, and some alternative documentation programs will accept the most recent 12 months’ bank statements for your business showing the cash flow for the business.

Business Documentation

Lenders will want to verify the legitimacy of your business. We may need to obtain a copy of your business license or registration or request a letter from your CPA or accountant certifying the nature of the business and how long it has been established.

Debt

Having debt does not exclude you from homeownership, but because lenders assess your debt-to-income ratio to determine your financial situation, be ready to disclose any personal outstanding debts, loans, or obligations. In most circumstances, we can exclude business debts or loans from your personal mortgage application.

Credit History

Maintaining a good credit history is vital when applying for a mortgage. Ensure your credit report is accurate and up to date. If you would like to repair your credit score before moving along in the process, we have a few tips to help.

Personal Identification

Provide valid identification documents such as your passport or driver’s license.

Self-Employed Loan Options

Finding a great home loan when you’re self-employed involves careful consideration of your needs, finances, and history. Fortunately, some programs cater to self-employed individuals.

Bank Statement Loans

A bank statement loan allows clients to qualify based on personal or business bank statement deposits rather than traditional income documentation like tax returns.

No-Income Verification Loans

A no-income verification loan allows clients to qualify without traditional income documentation, relying instead on assets, credit, or other financial factors.

Conventional or
FHA Loans

Conventional and FHA loans require documented income, good credit, and manageable debt, with FHA loans offering more flexibility for clients with diverse credit profiles.

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Benefits of Getting a Self-Employed Loan

Self-employed loans make homeownership possible for entrepreneurs and freelancers with flexible options and several financial benefits.

Potential for Higher
Loan Amounts

As a self-employed individual, business profits can boost your borrowing capacity, potentially allowing you to qualify for a higher loan amount.

Flexibile Income
Reporting

Self-employed clients may qualify to use alternative income verification methods, such as bank statements, gross deposits, or asset-based lending, depending on the lender.

Tax Benefits and
Write-Offs

Some self-employed individuals may reduce taxable income through business deductions, which may increase mortgage affordability or lower tax liability.

Do’s and Don’ts
for Self-Employed Loans

Here are some takeaways you should take into account when getting pre-approved for a self-employed loan.

Organize Your Financial Records

Maintain Consistent Income

Keep Personal and Business Finances Separate

Prepare for a Larger Down Payment

Call Us With Any Questions!

Don’t Make Sudden Changes to Your Business

Don’t Overstate Your Income

Don’t Neglect Your Credit Profile

Don’t Apply for New Credit Lines or Loans

Don’t Make Any Large Purchases

Self-Employed Loans FAQ

How long do I need to be self-employed to qualify for a loan?

We require at least two years of self-employment history. We may accept one year if you have a strong credit score or other compensating factors.

Can I qualify for a self-employed loan with a low credit score?

It’s possible, but you may need a larger down payment or additional documentation to offset the risk.

Will tax deductions affect my ability to qualify?

Yes, excessive write-offs can lower your taxable income, which may impact your eligibility for a mortgage.

What if my business is new or growing rapidly?

Lenders might look at other factors, such as your personal credit history, savings, or projections for future business growth.

Should I apply individually or jointly if I’m married?

If your spouse has a steady income and strong credit, applying jointly may improve your chances.

What if I have irregular or seasonal income?

Lenders may average your income over a longer period or look at your cash reserves to account for fluctuations.

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How to Get a Mortgage When You’re Self-Employed

Our self-employed loan blog helps you understand your eligibility, benefits, and challenges and offers tips for a smoother application process.

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Self-Employed Loan

What Is a Self-Employed Loan?

Requirements forSelf-Employed Loans