Self Employed Loans
A “self-employed” borrower is someone who has an ownership interest of 25% or more in a business, or is not a W–2 employee. If you receive income from your own business, rather than a regular wage from an employer, you are considered “self-employed.”
There are no special requirements that make it harder for self-employed people to get a mortgage, and self-employed mortgage borrowers can apply for all the same loans “traditionally” employed borrowers can. However, getting a mortgage when you are self-employed is more complicated than for “traditionally” employed borrowers when it comes to income verification. Borrowers will generally need to show at least two years of steady self-employment income before they can qualify for a home loan.
Just like traditionally-employed borrowers, important factors for self-employed borrowers include credit score and debt-to-income ratio (DTI). Additionally, self-employed borrowers will need to provide asset and income account statements to verify resources. It’s important for self-employed borrowers to understand that only taxable income is considered in the mortgage calculation. While taking deductions on your self-employed income can save you money at tax time, it can also hurt you when it comes to your mortgage application by reducing the loan amount you qualify for.
Bank statement loans can be a good option for self-employed borrowers because they allow borrowers to qualify based on total funds coming in rather than income tax returns. With a bank statement loan, the borrower qualifies by showing the last 12-24 months of bank statements. Bank statement loans are non-qualified (non-QM) mortgages, which means they lack some of the consumer protections of major loan programs and have higher interest rates.
At Elev8 in Bend and Central Oregon, we work with self-employed clients to get the most competitive rates possible on the best loan product for your individual situation. We know that it can require a few more hoops, but we make getting loans easy for self-employed borrowers.