Navigating the mortgage process as a self-employed individual can seem complex, but understanding the requirements upfront can make it much smoother.
At The Mortgage Mark Team, we specialize in helping self-employed borrowers achieve their homeownership dreams. Let’s break down what you need to know.
Who is Considered Self-Employed?
In the mortgage industry, you’re considered self-employed if you:
- Own 25% or more of a company.
- Work as a 1099 contractor.
- Earn commission-based income, even if you receive a W-2.
It’s important to recognize that even if you don’t traditionally think of yourself as self-employed, lenders might classify you as such based on these criteria.
Standard Self-Employed Home Loan Requirements
For conventional loans (like Fannie Mae, Freddie Mac), FHA, VA, and USDA loans, self-employed borrowers typically need:
- Two years of tax returns (both personal and business).
- A year-to-date profit and loss (P&L) statement.
While these are general guidelines, some programs may waive the tax return requirement if you have been self-employed for over five years and have a consistent income history.
Understanding Profit and Loss (P&L) Statements for Self-Employed Borrowers
Don’t be intimidated by the idea of a P&L statement. It’s simply a financial document that shows your business’s income and expenses over a specific period. We can help you understand and prepare this document so you feel confident moving forward.
Alternative Self-Employed Home Loan Programs
There are specialized programs designed for self-employed individuals, including:
- Bank Statement Loans: These programs use 12 or 24 months of business bank statements to determine income, which can be beneficial for borrowers with significant write-offs.
- DSCR (Debt Service Coverage Ratio) Loans: These programs are typically used for investment properties and focus on the property’s rental income rather than the borrower’s personal income.
Key Considerations for Self-Employed Borrowers
- Organization: Being organized and having your paperwork ready is crucial.
- Transparency: The more documentation you provide, the better your financing terms will be.
- Professional Guidance: Working with an experienced mortgage professional can help you navigate the complexities of self-employed loans.
New to Self-Employment?
Even if you’re newly self-employed or have inconsistent income, there may be loan options available. Don’t hesitate to contact us to discuss your situation.
Get Started Today
At The Mortgage Mark Team, we’re dedicated to helping self-employed individuals achieve their homeownership goals. Contact us today to learn more about your options. And remember, when you think mortgage, think Mark!
Mark Pfeiffer
Regional Sales Manager
Loan Officer, NMLS # 729612
(972) 829-8639
MortgageMark@MortgageMark.com